Tax Day is a good time to remind ourselves about our perilous fiscal situation. With a public debt (on which we pay interest) of $13 trillion and with annual deficits of just under $500 billion adding to the debt each year, we have a huge problem which is not being adequately addressed by Congress. The solution is to either raise taxes or cut spending or do a combination of both. Is it feasible to raise taxes, presumably on the rich? The problem in doing this is that our tax code is already very progressive as indicated by the above chart. The top 20% already pay 84% of all income taxes. It’s just not feasible to expect to be able to raise their taxes by a very large amount. In addition, Middle- and lower-income people are in a tight fiscal situation, because of the slow economy, and can hardly be expected to see their own taxes increase. The alternative to raising taxes is to cut spending and there are many opportunities to do this. The organization Citizens Against Government Waste has just identified a collection of government programs whose elimination would save $639 billion in the first year alone. Taxpayers for Common Sense has a long list of potential spending cuts which would save $267 billion in the first year.
Amazingly, neither of these lists of possible cuts includes any mention of entitlement programs. Before very long, major savings in entitlement programs must certainly be achieved in order to put the federal government on a sustainable fiscal course.
In fact, spending should be trimmed all across the board, wherever possible, in order to get our annual deficits on a steadily downward course. It is critical for this process to get under way as soon as possible and to continue until fiscal balance is achieved by entirely eliminating deficit spending altogether.
In response to the recent budget deal which has already passed the House of Representatives, Taxpayers for Common Sense has issued a new report “Real Savings, Real Deficit Reduction: Relieving Budget Caps with Common Sense Savings in Fiscal Year 2014”, showing how $100 billion could be cut from the federal budget for fiscal 2014, completely offsetting the supposedly onerous cuts required by the sequester. Here is a summary of what TCS has come up with:
Of course there are many ways to achieve $100 billion in savings in a single year and this is only one particular way to do it. But it is a balanced plan making roughly comparable cuts from many different agencies and also including a significant amount of tax expenditure savings. It would, of course, be much better to also include adjustments to entitlement spending such as Social Security and Medicare. A big reason for keeping the sequester in place, or offsetting it with equivalent cuts, as TCS is suggesting, is to create more interest in making necessary changes in entitlement programs.
Yet another way of accomplishing the same goal would be to keep the sequester spending levels in place but to give each government agency the authority to rearrange the spending cuts within its only agency. This is what management should be doing anyway on a routine basis.
It is very disappointing that Congress will not do the job, one way or another, that is required to operate the government on a sound financial basis. Let’s hope that the voters make big changes in the elections coming up in 2014!