The federal debt of $16 trillion and the recent annual deficit of approximately one trillion dollars are not sustainable. An increasing portion of our national wealth goes to pay interest on our debt. The ending of the wars in Iraq and Afghanistan will go a long way to helping reduce the annual deficit, but we have much more work to do in identifying savings and balancing the budget.
Any responsible approach to deficit reduction includes a balance of spending cuts, economic growth and targeted increases in revenue. The New York Times has created an interactive exercise in making specific decisions on ways to reduce the deficit. Give it a try and see where you come out with your balance of cuts and revenue.
One good discipline in discussing the deficit is to consider the biggest sectors of expenditures first. Most of the annual budget is comprised of social security, medicare/medicaid, national defense and interest on the debt. Take a look at this graphic representation of the proposed 2012 budget. Another, at least thoughtful deficit analysis, is the Simpson Bowles Commission.
The obstructionist politicians in Washington D.C. lack the political courage to compromise or even speak specifically about proposed deficit reduction ideas. Rather, our government is lurching from a debt ceiling extension to a super committee fix to a two month extension. This lack of stability is itself a barrier to our economic recovery.
I propose the following:
Expenditures to Cut
-Freeze on federal hiring and reductions of federal regulations
-Foreign military aid
-New aircraft carrier group
-Subsidies to big agribusiness
-Reduce the number of nuclear warheads from 2000 to 1000
Expenditures to Control
-Medicare rates for specialists, hospitals and medical equipment
-Extend prescription drug price competitive bidding from the VA to medicare overall
-Cap medicare growth per beneficiary at GDP plus 1%
-Move to eliminate the income cap of $110,000 for obligation to pay the 6.2% payroll tax (FICA)
-Restore the estate tax on large estates
-Restore the income tax rate for net income over $250,000 to 38.6% from the current 35%