This is something I had posted up on another forum while DP was down, in a thread asking about what is worse...debt or taxes. This was my thought and its a general idea I had in regards to a way to potentially pay down our debt. I'd like to hear thoughts from Democrats/Republicans/Independents on whether or not they like or could get behind such an idea. Here’s the general proposal…
First and foremost entitlement programs like Social Security and Medicare would need to be given a serious look and serious reform. With SS, likely with some kind of age-based optional opt out and mandatory opt out, and dedicated funds from its taxes to keep it from being used in other expenses. With medicare likely a tightening of the requirements surrounding it. With both an upping of the minimum age. These two singular expenses account for a larger portion of our budget, and thus what causes us to go into debt, than any other thing. To talk about taxes, or even general spending cuts, when discussing the debt is ignoring the giant elephant in the room which are these two mammoths.
Second, spending cuts would be needed and an actual legitimate limit would need to be placed rather than the continual "emergency spending" that every administration uses for rather none emergency stuff. Rather than the federal budget increasing every year we need to see a backwards trend. Now, I'll be realistic here. Some of these cuts DO have to come from the military, but in a proportional way. For example the military shouldn't have its budget slashed by 15% while foreign aid, art grants, and welfare is cut a combined 1%. If we're going to be serious about getting down the debt we need to cut the fat and while there is some fat in the military ultimately it is an essential program of the Federal Government, where as there are other programs that have a good deal more "fat" to them in regards to them being a luxury not a necessity for the government. However, I think there should not be a single solitary sector of government that does not fill the criteria for some kind of budget cut.
As such I would adjust the current budget for inflation, and then give every program/agency a 1% budget cut to begin this. After that additional cuts to programs and agencies could be applied. I would suggest the percentage of the budget cut from these various sectors should remain within about a +-3% range from each other so it doesn't become to politicized that one things being cut over another. The other alternative to cuts would be that if there’s anything so strikingly full of “Fat” that it would need a greater cut then it should be looked at as something to possibly remove entirely.
Third, would come taxes of some sort. If the desire is to pay down the debt then these taxes should clearly, and unchangingly, exist only to such a point that the debt is paid down. Additionally, it should be unchangingly tied directly to the spending decreases. What I mean by this is that if the government, in accordance with number 2, cuts their budget and sticks to it then the “paying down the debt tax” would be valid and in effect the following year. If the government goes over that budget for the year then the following year the "paying down the debt tax" would be invalid and not apply, and would not return until the following year IF the government maintained proper spending.
To put another way....
2010 – Legislation passes. Debt Tax in place; Government ends up spending more than their budget allowed
2011 - Debt Tax suspended; Govenment ends up spending more than their budget allowed
2012- Debt tax suspended; Govenement ends up spending less than their budget allowed
2013 - Debt tax in place
This does a few things...
For those that think controlling spending is the solution and dislike taxes, then it guarantee’s the later only happens if the former does.
For those that think taxes are going to be the best way out of this but think politicians won’t cut spending, it provides a situation where it gives politicians a reason to cut spending to get that tax.
If the government upholds its end of the bargain we end up addressing the debt both by reduction in spending and in increased taxes, thus hopefully paying the debt off quicker.
In regards to the tax I think it'd needs to be tailored in a specific way. The debt is on ALL American's shoulder's and the tax should apply to everyone. I would personally suggest you do a 2% sales tax that would apply to everything but non-alcoholic/tobacco groceries. This money would be earmarked to go to paying down the debt and ONLY paying down the debt, meaning the government could not touch that money for any other program.
While small, to give you an indication of the impact I'll look at one sector of the economy that one would imagine is a rather small niche market; video games. American's spend $25.3 billion each year on video games, meaning a the tax on them alone would generate just over half a billion dollars towards the debt.
At 2% it is low enough that it should not as a disincentive to spending in any large degree. By making it earmarked specifically to the debt those against tax increases do not have to worry about it being spent for other government programs and entitlements. With it not applying to grocery purchases this would not have a large impact on "the poor" being unable to have necessary sustenance, and with it being a sales tax it should not have a large impact on their ability for renting housing for shelter. What impact it would have would be relatively small, again, due to being only 2% and that amount being minor on lower dollar items. However, it would still end up pulling far more money from "the rich" than it would the poor due to the fact "The Rich" tend to both buy a higher quantity of, and more expensive, luxury items which would be affected by this tax. It would also not discriminate from those that are "Rich" who make it through things that normal income tax would not hit.
It would also provide a nice economic boosting mechanism for the point where the debt is reduced, as the removal of the tax would generate an across the board lowering of the cost of living for people.
[list][*]Reform of Social Security and Medicare first and foremost to lower the budgetary burden it presents, with the goal in regards to the first one to eventually have it removed within a couple of decades or have a more fiscally manageable version in place. [*]Reduce the budget across the board by 1%, with additional cuts or program removals where needed and remaining within a total +-3% variation. [*]Implement a small sales tax reserved directly for paying down the debt.[*]Tie the tax’s validity directly to the reduction of spending in hopes of guaranteeing the spending cuts are more likely to occur[*]
Could something using this as a generic foundation be an agreeable compromise between all sides on how to deal with what is without question a massive issue in our country?