A Responsible Way to Fix the Budget Without Destroying the Future

As I mentioned in my last blog post, our budget needs fixing. Revenues have decreased since 2000, thanks both to this recession and the massive tax cuts that both the Obama and the Bush administrations have been making. Spending, however, on just about everything imaginable has increased. That’s not a recipe for a healthy budget or a healthy country, but here is my proposal for a budget that will be balanced in 2015. At the end of every item I am including the savings for the 2015 budget in parenthesis. I am using the CBO estimate of a $500 billion budget deficit in 2015, which is noticeably smaller than it is today because it takes into account increased post-recession tax revenue.

Spending Cuts:

-Cut foreign aid in half. People are angry about supporting Pakistan, and people are also angry about Israel refusing to listen to America. Take that and aid to some other countries and spend it here invest- spend it to fix our deficit problem! ($10 billion)

-Eliminate farming, oil and gas subsidies. ($21 billion)

-Cut federal employee pay by 5%. It’s better than firing them, and they’re lucky that they survived this recession intact anyway. ($14 billion)

-Cut nuclear arsenal down to 1,050 warheads, reduce Minuteman missile amounts, cut funding for nuclear, missile and space warfare R&D. The Soviet Union isn’t an enemy anymore, and Russia is cutting its nuclear arsenal too. Besides, 1,000 warheads is still more than enough to destroy the world if we feel like it. ($19 billion)

-Cut the military down to pre-2003 levels, and limit the deployment in Europe and Asia to 100,000. ($25 billion)

-Remove all troops from Iraq and Afghanistan by 2014. ($60 billion)

-Cap Medicare growth to 1% + GDP growth starting in 2013. This will crack down on hospitals and doctors who are spending too much at the expense of government Medicare money. ($29 billion)

-Cap Social Security benefit increase to the rate of inflation for people with high incomes. ($6 billion)

-Reduce military compensation for veterans who were not wounded in combat ($23 billion)

-Raise Medicare retirement age to 67 and increase premiums for the wealthy. This follows a plan recently proposed in the Senate for fixing Medicare. ($60 billion)

-Add a public option for “Obamacare”. It’s a valuable cost saving tool that will prevent health care costs from spiraling out of control. ($15 billion)

Increased Revenue:

Return to Clinton-era taxes:

-Estate tax exemption of $1 million. Rate starts at 18% and increases to 55% starting at $3 million. Currently the exemption is at $5 million with a top rate of 35%. ($38 billion)

-Tax dividends as ordinary income and tax capital gains at 10% for low-income households and 20% for everyone else. ($32 billion)

-End all Bush income tax cuts, equal to about a 2% increase for everyone. ($172 billion)

Other increased revenue:

-Readjust the payroll tax for Medicare and Social Security ceiling to cover 90% of all income, as it was intended to. Currently it covers about 80%. ($50 billion)

-Add a new tax bracket for millionaires, giving them a 5.4% surtax. ($50 billion)

-Overhaul tax system under the Bowles-Simpson Plan, eliminating many loopholes and tax breaks while also cutting tax rates. ($100 billion)

-Add a carbon tax of $23 per ton of CO2, increasing annually by 5.8% ($40 billion)

New Investments:

-Invest $10 billion to the Department of Energy for energy efficiency and clean energy research and development. This is almost double the budget of the DOE, and will not just create savings on energy, but will create new high-tech jobs and promote energy independence. This would be paid for by eliminating the tax breaks for oil and gas.

-$250 billion in infrastructure investment. You might have seen the infrastructure report card issued by the American Society of Civil Engineers back a few years ago- the average grade was a D. America’s infrastructure has long lacked solid and dedicated investment, and it’s time for that to change. Infrastructure creates jobs, both to create it and by the use that it serves the country. It can’t be neglected, even when trimming the budget. Here is where some of the money would go:
 -$11 billion for replacing aged drinking water treatment facilities.
 -$15 billion for replacing aged wastewater treatment and sewage facilities.
 -$20 billion for road expansion and repairs, which will cut down on excessive wear and tear on vehicles, improve road quality and improve driver safety.
 -$50 billion for dam repairs, of which $16 billion will go to high-hazard dams.
 -$18 billion for improving transit safety and conditions.

There we go, $764 billion in decreased spending or increased revenue, combined with $260 billion in increased expenses. That’s roughly enough to solve the deficit problem and at the same time providing necessary investment for the future. You might notice that the amount of spending cuts that I proposed is almost equal to the amount of spending increases I’ve proposed. That is correct, but the infrastructure expenses would only need to be that higher for maybe a decade, after which most of that money could be cut and we’d have an infrastructure system to be proud of.

Other nice spending cuts that I’d suggest considering are cutting the size of the federal workforce, decreasing the amount of government contractors, cutting aid to states, cutting additional unnecessary projects from the DoD, freezing all discretionary spending, enacting a gas tax and more. However, given the fragile state of the economy, those actions have the strong potential of hurting economic recovery too much, and is best left for a later time.

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