Tag Archives: debt

What do we need to do to avoid the fiscal cliff?

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Although Republicans need to be prepared to jump off the cliff, at the same time they also need to make every reasonable effort to avoid taking this drastic action.  Mr. David Walker, the CEO of Comeback America and former Comptroller General of the United States, has described very clearly, on the Politico website, what kind of deal the Republican House of Representatives should be looking for.

In return for raising taxes on the wealthy, the House should insist on two concessions from the President and the Senate.  First of all, there must be an immediate and significant down payment on the spending cuts required by the sequester.  Comprehensive tax and social insurance reforms, a so-called Grand Bargain, would be deferred until a set date in 2013, to give the new Congress time for careful deliberation.  The debt ceiling limit would be raised just enough to get by until the new deadline next year.   A fail-safe hammer would be put in place to kick in if the deadline is not met.

Mr. Walker suggests that the long term goal, say by 2024, should be to reduce debt to 60% of the economy.  This will require an approximately $4 trillion combination of revenue increases and spending cuts over the next ten years.  There would be appropriate interim milestones set up to be met along the way.  My personal preference is to hold out for a balanced budget by a date certain but the main thing is to negotiate an ironclad agreement to put our fiscal policy on a sustainable path.  Anything less will lead to a dangerous fiscal crisis in the very near future, far worse than the present danger of going off the cliff.

A Minimum Tax for the Wealthy?

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Warren Buffett has proposed a minimum tax for the wealthy in the November 26, 2012 edition of the New York Times. It is reprinted in the Omaha World Herald on November 28, 2012. The proposal is for a minimum tax of at least 30% on all income over $1 million.

Mr. Buffett’s proposal is amazingly similar to Mitt Romney’s tax proposal during the campaign. Mr Romney’s plan is cut everyone’s tax by 20% starting from the Bush tax rates which top out at 35%. This means that Romney’s top rate would be 28% and he would limit deductions to an absolute dollar maximum of $25,000 or so. A very high income person would pay 30% according to Buffett and very close to 28% according to Romney. The difference between 30% and 28% is minor! Shall we compromise at 29%?

Mr. Buffett’s purpose is to make the tax code more equitable and Mr. Romney’s purpose is to stimulate the economy with lower rates. It sounds like we may be able to accomplish both goals at the same time! Growing the economy, and thereby increasing tax revenue, is essential to drastically shrink deficit spending in order to stabilize the national debt. Growing the economy is also the best way, the quickest way, to create more jobs and lower the unemployment rate.

With the Buffett and Romney tax proposals so similar, perhaps Congress and the President can agree on a plan for pro-growth tax reform. This will be a big step in the right direction. In fact it is half the battle to solving our economic and fiscal problems. The other half, of course, is to make spending cuts. Progress in this area will be far more difficult and contentious but just as important, if not more important, than tax reform. The (Republican) House of Representatives will have to show a lot of leadership to make progress in this direction.

The fiscal cliff

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What should we do about the “fiscal cliff”?  First of all, we have to recognize that it has been caused by a combination of reckless federal spending and an unwillingness to implement policies which stimulate private sector economic growth such as broad based tax reform, relaxation of onerous regulations and vigorous promotion of free trade.  This means that short term measures which merely drive up the deficit will accomplish nothing more than kicking the can down the road and are therefore not helpful.  We need a long term solution!

The most valuable single thing we should do right now is to start reforming the tax code along the lines of the Simpson-Bowles Plan.  Cut individual tax rates and offset revenue losses by limiting tax deductions.  Also cut corporate tax rates, offset again by limiting deductions.  I would also say to increase the tax rate on capital gains and dividend income from 15% to 20% (reversing one particular Bush tax cut!) which will still be a much lower rate than for ordinary income and therefore will not discourage risk taking by investors.

Growing the economy faster will shrink the deficit but we also need substantial spending cuts to make a bigger impact on trillion dollar deficits.  Of course, cutting $100 billion across the board from discretionary spending as the “sequester” does, is not the most sensible way to cut spending but we’ve got to get the job done!  So let the sequester stand unless Congress can agree on a more rational plan of the same magnitude.

Basically what I am saying is that our economic problem of slow growth and our fiscal problem of huge deficits are closely interrelated and that we are much better off to address both of these problems simultaneously.  For Congress to take the easy way out by 1) just extending all of the Bush tax cuts, 2) failing to make significant spending cuts and 3) raising the debt limit without substantial reform on taxes and spending, for Congress to proceed on this basis is to shirk its duty in a time of crisis!

Let’s hope that Congress can rise to this critical occasion and do what is sorely needed!

Solving our economic and fiscal problems

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“The Election winners must choose between fiscal calamity and compromise” said Robert Bixby, Executive Director of the Concord Coalition, in a blog post yesterday.  “There must be spending cuts, including reform of our major entitlement programs such as Medicare, Medicaid and Social Security.  And there must be tax reform that broadens the base, maintains progressivity and increases revenues.  And all of this must be, and indeed can be, done in a way that enhances economic growth.”

This is an excellent statement of our country’s dire fiscal condition at the present time, put very clearly but in a nonpartisan and non-confrontational way.  It is critical that our national leaders, all of them and from both political parties, focus their full attention and efforts, on solving this problem.  As a highly interested local office holder in Omaha NE, I will be using this blog format to state in a direct and unequivocal manner what action Congress and the President should take in the days ahead to put our nation on a sound and sustainable economic and fiscal track.

Our immediate goal must be to stabilize (i.e. stop adding to) the national debt and this means quickly shrinking the size of our annual deficit until it either disappears entirely, or is at least greatly reduced.

First of all, we need to do a better job of growing the economy.  This will not only put more people back to work, but will also raise additional tax revenue, which will shrink the deficit.  In the meantime, while we’re working harder to stimulate the economy and make it grow, we also need to get started on making huge spending cuts in our national budget.  Let’s cut from programs across the board, especially including entitlements.  This is not only the fairest and most nonpartisan way to attack the problem but will also achieve the biggest overall spending cuts.

In the weeks ahead I will be as specific as I can possibly be on where spending cuts can be made.  I will also try to stay locally focused.  In other words, I will be paying close attention to the Nebraska congressional delegation and what our own representatives are doing on tax and budget matters.  Please consider contributing your own ideas to this forum so that we can work together to effectively address our country’s urgent fiscal problems!

My purpose in creating this site

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I am so concerned about the federal deficit and the rapidly increasing national debt that I entered the recent Republican Primary for Nebraska’s Second Congressional District. The Primary was held on May 15, 2012 and the incumbent, Lee Terry, was re-nominated.  Mr. Terry went on to win re-election to an eighth term on November 6.

My platform was (and still is) to completely eliminate the deficit. I describe myself as a non-ideological fiscal conservative. By this I mean that I am highly focused on fiscal issues with no particular axe to grind besides cutting spending and increasing revenue through tax reform and economic stimulus.  Even though Presidents George W Bush and Barack Obama are primarily responsible for our huge deficits in recent years, it is Congress which enables presidents to spend money and therefore Congress bears much responsibility as well. My attitude is that any member of Congress who is not actively and clearly providing leadership in cutting spending also bears responsibility for our huge deficits.

At this point, having spent so much time and effort in the political process, I am still highly committed in a personal and emotional sense to addressing this issue. This website will be used by me to continue raising awareness on the very same issues about which I recently campaigned as an active candidate.