Thursday, June 6, 2013

Instead of Cutting Entitlements, Do This

The Huffington Post reports that the Center for American Progress ("a pillar of the Democratic establishment in Washington") is walking away from negotiations aimed at reaching a grand bargain in the pursuit of a deficit-reduction deal.

In a report by Michael Linden, the center's managing director for economic policy, he says "It's time we reset economic policy in Washington to focus on growth instead of deficit reduction." (Such as creating jobs, instead of cutting jobs.)

Washington's recent focus on political scandals has distracted attention from a deficit deal, but with debt-ceiling and budget fights looming in the near future (on top of the current sequester cuts), backers of austerity (the Republicans) have signaled that they will continue to argue for more spending cuts --- despite all the reasonable arguments that were made against this, and the fact that record cuts have already been made, and that the budget deficit has already been shrinking faster than at any time since World War II.

May 2013 - "Washington is on the verge of achieving a pace of deficit reduction surpassing even the fiscal tightening that helped to trigger the 1937 economic relapse and extend the decade-long Great Depression."

The GOP's plan has always been for much smaller government, known as "starving the beast" --- meaning, less spending on "entitlements". The Center for American Progress argues that there is no point in seeking any deal with the GOP because they have made it perfectly clear that they won't ever compromise with the Democrats --- at least, not while Obama is still the President. But with so many members of the Tea Party holding gerrymandered districts, even that might not matter any more. They may still obstruct, regardless of who the next president might be. The GOP might have been obstructing Mitt Romney if he had be elected last November.

The Huffington Post has a few good ideas for budget savings and raising revenues, rather than just cuts to entitlements --- and a few are listed below (with my notations).

But what the Huffington Post didn't also mention was, raising the minimum wage (including, for tipped employees), reforming the tax code and taxing capital gains as regular income, instituting programs to put the long-term unemployed back to work, reduce or eliminate H-1B visas until skilled Americans are hired first (at the prevailing wage), renegotiate ALL our "free trade" agreements, force the repatriation of overseas corporate earnings and tax them at the "statutory rate" of 35% (not at a lower "effective rate", with applied loopholes), and ban any further outsourcing of manufacturing, service, and tech jobs.

Also, the Huffington Post didn't mention raising (or eliminating) the "cap" on Social Security taxes. Most working Americans pay this tax on 100% of their income (up to $113,700 a year). Everything else above that is free and clear from Social Security taxes. Imagine someone like Christy Walton (of Walmart) who earns dividend income of $1 million a day! That's a HUGE tax savings for wealthy Americans (because they don't need a Social Security income when they retire). Strengthen Social Security, don't cut it!

Don't Cut Entitlements, Do This Instead...

Prison Reform: The U.S. incarcerates its citizens at a rate roughly five times higher than the global average. We have about 5 percent of the world's population, but 25 percent of its prisoners, according to The Economist. This status quo costs our local, state and federal governments a combined $68 billion a year -- all of which becomes a federal problem during recessions, when states look to Washington for fiscal relief. Over the standard 10-year budget window used in Congress, that's a $680 billion hit to the deficit.

Solving longstanding prison problems -- releasing elderly convicts unlikely to commit crimes (excluding pedophiles, rapists and murderers), offering treatment or counseling as an alternative to prison for non-violent offenders, slightly shortening the sentences of well-behaved inmates, and substituting probation for more jail-time -- would do wonders for government spending.

Editor's Note: De-criminalizing and taxing marijuana would go a very long way to reducing crime and our prison population --- and it would also be an excellent trade-off for a non-addictive drug --- as opposed to alcohol and legally prescribed medications (see below). Also, maybe the Republicans could stop passing state laws to drug test all those lazy people who are applying for unemployment benefits.

End the War on Drugs:The federal government spends more than $15 billion a year investigating and prosecuting the War on Drugs. That's $150 billion in Washington budget-speak, and it doesn't include the far higher costs of incarcerating millions of people for doing drugs. This money isn't getting the government the results it wants. As drug war budgets balloon, drug use escalates.

Ending the Drug War offers the government two separate budget boons. In addition to saving all the money spending investigating, prosecuting and incarcerating drug offenders, Uncle Sam could actually regulate and tax drugs like marijuana, generating new revenue. Studies by pot legalization advocates indicate that fully legalizing weed in California would yield up to $18 billion annually for that state's government alone. For the feds, the benefits are even sweeter.

Allow Medicare Negotiate with Big Pharma: The U.S. has higher health care costs than any other country. We spend over 15 percent of our total economic output each year on health care -- roughly 50 percent more than Canada, and double what the U.K. spends.

Why? The American private health care system is inefficient, and the intellectual property rules involving medication in the U.S. can make prescription drugs much more expensive than in other countries. Medicare currently spends about $50 billion a year on prescription drugs. According to economist Dean Baker, Americans spend roughly 10 times more than they need to on prescription drugs as a result of our unique intellectual property standards.

These savings for the government, of course, would come from the pockets of major pharmaceutical companies, currently among the most profitable corporations the world has ever known. They also exercise tremendous clout inside the Beltway. President Barack Obama even guaranteed drug companies more restrictive -- and lucrative -- intellectual property standards in order to garner their support for the Affordable Care Act.

Editor's Note: Capping CEO pay and taxing capital gains as regular income for all healthcare administrators (such as the CEOs of Big Pharma, insurance companies and hospital presidents) might also help reduce the greed and corruption in the health care system.

Offshore Tax Havens: The U.S. Treasury Department estimates that it loses about $100 billion a year in revenue due to offshore tax haven abuses. Sen. Carl Levin (D-Mich.) has been pushing legislation for years to rein in this absurd tax maneuvering, but corporate lobbying on Capitol Hill has prevented the bill from becoming law.

Editor's Note: This, and all tax evasion, should be addressed by hiring more auditors for the IRS. Most Americans have their taxes automatically deducted from their paychecks, and aren't the problem; it's usually the higher income people who mostly manipulate their tax returns. But Congress keeps cutting the IRS budget (even though the IRS has also been accused of wasteful spending.)

De-privatize Government Contract Work: In recent years, the federal government has privatized an enormous portion of public projects to government contractors. Over the past decade, the federal government's staffing has held steady, while the number of federal contractors has increased by millions. This outsourcing has resulted in much higher costs for the government than would be incurred by simply doing the work in-house. On average, contractors are paid nearly double what a comparable federal employee would receive for the same job, according to the Project On Government Oversight.

Editor's Note: And we should reduce or eliminate "no-bid" contracts". Also, there are a few petitions floating around for capping the CEO pay of government contractors as well.

Financial Speculation Tax: Wall Street loves to gamble. In good times, financial speculation is the source of tremendous profits in America's banking system, but when the bets go bad, the government picks up the tab, as evidenced by the epic bank bailouts of 2008 and 2009.

Unfortunately, this speculation is difficult to define in legalistic terminology and even more difficult to police. One solution? By taxing every financial trade at the ultra-low rate of 0.25 percent, the U.S. government can impose a modest incentive against gambling for the sheer sake of gambling. If there's an immediate cost to placing a bet, a lot of traders will choose not to bet. What's more, this tax could raise about $150 billion a year for the federal government.

Editor's Note: But how can we get Congress to act on this when many members, on BOTH sides on the aisle, are trying to dismantle many important reforms in the Dodd-Frank bill --- such as trading derivatives.

Carbon Tax: Taxing greenhouse gases would generate $80 billion a year right now, and up to $310 billion a year by 2050, according to an analysis by the Brookings Institution. It would also help avert catastrophic ecological and economic damage from climate change.

Editor's Note: No! No! No! Obama himself said that under cap-and-trade, electricity prices would rise, whether it came from coal, natural gas [or whatever], because they would have to retrofit their facilities to cap greenhouse emissions, and that it would cost money to do that, and that the costs would be passed on to consumers. "Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket." (In his own words at YouTube)

A better idea might be to just nationalize the entire energy industry, make all the employees government workers, pay the top executives the same as President Obama, and sell all the energy AT COST to American consumers and businesses --- and export NOTHING. Only then can we talk about taxing carbon emissions, the Keystone pipeline, more drilling and increased fracking. Why should we sell any "surplus" oil (or natural gas) to China...just because they're now buying more cars than we are? Save our precious natural resources (including our water) for domestic consumption only.


The ADP National Employment Report just noted that private employers added 135,000 jobs in May . That would equate to 1.6 million new jobs created in one year....which is less than half of the 3.4 million who just graduated from high school this year. McDonald's might hire 62,000 people for summer jobs (like they do most years), but Fox News might tout this as being lots of jobs available for the unemployed --- even though there are only 3.8 million job openings for 11.7 million people who are unemployed. Even a governor of the Federal Reserve said, that because of the quality of jobs being offered, "Being a lifeguard didn’t look so bad."

And if that lifeguard is married with two children, and is only working part-time, and earning a minimum wage (with no health care benefits), the Republicans will always want to make sure that he/she doesn't also have access to Medicaid or food stamps. The GOP literally wants to "starve the beasts" (the 47%).

And let's all be honest and call "entitlements" what they really are --- "wage subsidies" --- and companies like Walmart and McDonald's benefit the most.

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