US Budget
Instead of boring everyone on facebook with my thoughts and ramblings on the US Debt Ceiling debate, I thought I’d explain it little more here.
First off I believe we need to raise the debt limit and at the same time get our spending under control. Defaulting on our debts would be a horrible thing for the country, and may very well send the world economy downwards. So let’s raise the debt ceiling.
Now let’s fix the problem at the root.
The budget that President Obama submitted to Congress would have the nation spending $3.456 Trillion (source). I think that’s too much. Let’s cut that by 11%. That’s a budget of $3.075 trillion. It shouldn’t be too hard. I’ll also point out that the proposed budget in 2008 was $2.9 trillion.
Second let’s fix the problem of tax loop holes and companies not paying their “fair share”. (Hang with me on this one, conservative friends.) Let’s institute a 16% flat tax on all corporations. Based on a $14.66 trillion GDP (source) that equates to roughly $2.345 trillion in tax revenue. That lowers the corporate tax rate from 35%, and closes all of the loop holes. This makes us very competitive on the world scale for tax rates.
Third let’s fix the problem of tax loop holes and citizens not paying their “fair share”. (Yes deductions are “loop holes” so there goes mortgage interest deduction and the charitable contributions deduction.) Let’s have a flat rate of 15%. Individuals will still pay less than businesses. That would bring in roughly $848 billion in tax revenue (Taking number of households in US times the median household income as provided by the US Census Bureau).That also means any single person making more than $34,000 a year would see a tax cut. Married people making more than $68,000 a year would see a tax cut. Those making less than $8,375 would see a tax increase of 5% (that’s $419 per year). Married couples making less than $16,750 would see a tax increase of 5% (or $837) per year.
This brings us to a total US Revenue of $3,193,915,773,111. My budget proposal was $3.075 trillion. So we have a budget surplus of $118 Billion. That would allow us to retire the national debt that much sooner. Putting away $118 billion to paying off debt would (on top of what we are budgeted to pay off each year already) would help straighten out the financial ship of the United States.
It’s easy to see that the numbers speak for themselves. Unfortunately there’s no political will for this kind of drastic reform.
Disclaimers: Due to rounding and the like my numbers may be off a little bit, but they should be generally accurate.
All opinions are my own and not that of my employer.
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Interesting proposal. I like the flat tax and the loop hole bits. Do you have specific ideas on where the 11% cut would come from?
Comment by Joe Buck — July 26, 2011 @ 9:31 pm
I’d decrease some spending in every area, no exceptions. I don’t have any programs in mind, but across the board spending would have to decrease. No “sacred cows”, because that’s part of what has gotten us into this mess in the first place.
Comment by bleaus — July 26, 2011 @ 10:11 pm
Seems like a balanced approach. I’m in. And nice post.
Comment by Joe Buck — July 26, 2011 @ 10:20 pm
Austin! We pretty much agree! This is exciting. But I think the majority of Americans agree on the general issue- that the solution needs to be a combination of both spending decreases and revenue/tax increases. I’m curious, how do you feel about the politicians who are jumping on the “no new taxes” bandwagon? I kind of think it’s just Republicans who don’t want to upset the Tea Partiers….
Comment by Hannah Forney — July 26, 2011 @ 11:29 pm
Hannah, you sound surprised that I’m a reasonable guy!
Like I said to JoeBuck, no sacred cows. Everything needs to be on the table. The minute you take anything off the table (raising taxes, cutting education, cutting defense, cutting social security, etc.) you’ve lost some credibility (in my book) and compromise is harder to reach. That being said if we are fighting a war and we both agree that we shouldn’t cut defense (or we both agree that we need to invest in better roads and bridges and we shouldn’t cut it, or pick your favorite program) and we can both agree to other areas that we could cut deeper I’m fine with it. The art of being a statesmen seems to have been lost. A good statesmen works for the better of the people. Politicians work for politics. I like to believe I’m more a statesmen then a politician.
Each side needs to give up something for a compromise. If any side says it’s all or nothing we get gridlock and chaos. I’d like to avoid that.
Comment by Austin — July 27, 2011 @ 8:09 am
I guess I’m a bit late in ‘cashing in’. Generally speaking, I like your idea with the exception of one point–mostly because I’m a bit of a cynic. First, I’m very pleased that you have come up with a reasonable system for taxation that does ultimately raise revenue while decreasing taxes on the whole. I would imagine that individuals and small business owners would especially like this too–not to mention those who have been looking for a job for God knows how long! I, personally,am on the ‘no new taxes’ bandwagon. Your approach effectively captures what I believe to be the ‘heart’ of that sentiment while at the same time making allowing for the intake of revenue that is necessary for the function of government.
Here’s where my cynicism kicks in. With an increase in the tax ceiling, those who spend get to breathe a sigh of relief that they’ve been ‘allowed’ to get away with poor spending habits/behavior. Realistically, were spending to decrease, we would be in a better position to deal with these issues (which wouldn’t be issues) in the first place. The reason for a debt ceiling in the first place (at least in my mind–feel free to correct me if I’m wrong) is to keep spending from becoming out of control in the first place. While a little part in my goes a bit twitchy at the prospect of not being able to pay our debts (in theory), we don’t seem to be able to learn if we don’t learn ‘the hard way’ in some cases. Now, that said, assuming your approach was adopted in the first place, revenue would be higher, and the powers that be would have greater spending power than they did before (which may or may not be a good thing). I would be shocked to see that money going to pay down debt when it could be going somewhere else to fuel someone’s pet project. Ultimately, that’s my cynical though/approach.
To cap it off, I really like your approach. It’s a viable solution–assuming the practical items get implemented as they should (the tax rates, clearly). It’s great to see a viable solution…now, if only someone else would ‘discover’ this…
Excellent thinking, Austin!
Comment by Steve C. — July 28, 2011 @ 6:04 am