boonecountygirl
Wiley Coyote
hal
Herman Cain
Mark Pellin
The Massive Compromise of 2011 We Need
“But with respect to future debt; would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19 years?” - Thomas Jefferson, September 6, 1789
Maybe we should listen to Mr. Jefferson, don’t you think?
Don’t read this post if you are not completely serious about reducing these gargantuan federal budget deficits and the national debt for us and our children, before they do irreparable harm to our economy and nation.
Don’t read this if you still believe that Santa Claus drops presents down the chimney at Christmastime, the Easter Bunny really lays Easter eggs, or that we can: A) cut taxes a lot more AND B) not reduce spending or make major reforms to our entitlement programs and come out of this all right.
And please don’t read this if you think we can just spend whatever we want whenever we want without incurring some big-time consequences down the road as a nation.
Now that we have winnowed the audience down to perhaps a handful of responsible adults out there, let’s think honestly and openly about how we can get this thing solved once and for all. Then we can all go on about the rest of our lives without ever hearing anyone talk about the ‘federal budget deficit’ again. (Lord! Let It Be So!)
Just one final reminder of just how seriously incompetent we have been as a nation over the past 30 years:
We are the very first generation of American citizens (‘We’re #1!’ ‘We’re #1!) who have rung up such an enormous debt without fighting a major war to gain our independence (1776-1781); keep our nation intact (1861-1865); or save the world from megalomaniacal madmen like Hitler (1941-45).
Even during the Great Depression, we ‘only’ ran up the national debt to 35% of a crashing GDP. We are now have a debt load at 80%+ of GDP … and still growing .
Here are some over-arching principles we would like to see going forward:
1. Let’s take corrective actions today in one fell swoop and correct our fiscal imbalances … before the Chinese and Japanese stop buying our debt and force us to make these same decisions we need to make on our own without any foreign country dictating to us what to do.
2. Let’s set a course of fiscal sanity that will last us not through the end of the next fiscal year, but through the whole century so our kids and grandkids can get a chance to ‘secure the blessings of liberty’ as promised to them in the Constitution.
3. Let’s adopt an attitude that the federal government should be limited in scope and allow state and local governments to fund and administer programs tailored to their specific needs.
4. Let’s return to the concept that federal assistance, in any form or manner, should be reserved to very narrow dictates of providing for the common defense; providing for some semblance of the common welfare for the nation as a whole, and helping to provide for people who really can not provide for their own selves or families for whatever physical, mental or sociological reason there might be.
5. People who have the means and wherewithal to provide for themselves will not be included in any federal entitlement program going forward. The Founders never envisioned billionaires such as Warren Buffett or Bill Gates drawing a ‘measly’ $3000/month from Social Security or being subsidized to the tune of $12-15,000 per year for ‘mandatory’ Medicare Part B coverage like the average senior.
6. Use the tax code to raise funds solely for the purpose of paying for federal programs we approve of and have in law, not to punish or advantage any one group of people versus another.
Actions to Take:
1. Establish a target of 19% of GDP for federal tax receipt in total (since that is what is has been close to for the past 30 years anyway)
2. Delay the expiration of the Bush tax cuts under current law for one year. (Obama is going to veto any complete repeal of these tax cut expirations anyway, so why not use it in some form of a deal?)
3. Raise the eligibility age of Social Security and Medicare to 70 in 3-month increments starting in 2011. We could have SS at 70 by 2023 and Medicare at the same threshold by 2026. (if you don’t let the Bush tax cuts expire, you might as well advocate raising both threshold ages to 80 tomorrow morning because you would have $3 trillion more to cut in spending over the next decade)
4. Transition to a consumption tax to replace, not augment, the current failed income/corporate/payroll/estate and excise tax system starting in 2016. (no income tax/no tax loopholes or deductions to protect. Pay taxes on what you buy and consume/No hindrance to saving and investing)
5. Restore PAYGO; entitlement spending increases have to be offset by entitlement spending decreases elsewhere or tax hikes somewhere; tax cuts have to be offset by entitlement spending cuts and discretionary cuts for the duration of the tax cuts and their effect on baseline projections; discretionary spending hikes have to be offset by discretionary spending cuts elsewhere.
6. Establish a hard cap on all discretionary spending, including defense and homeland security, for the next 5 years, almost as if a CR (continuing resolution) were passed at the end of each fiscal year to keep funding at the previous year’s levels.
7. Get Congress take one 2-year session to analyze and evaluate every single federal program and decide which are working and which are not. And then produce a bill to eliminate all programs that are not working and fund the ones that are working at their minimum effective level.
8. Pass a balanced budget amendment (with war/economic hardship exceptions) to the Constitution, as Mr. Jefferson suggests above.
We don’t like higher taxes any more than you do. But we fear continued accumulation of humongous and dangerous levels of national debt much more – particularly when the real danger is compounding interest payments on the national debt when we know that the only direction for interest rates to go is ‘up’ from their near-zero levels of today. We are now spending close to 12% of our budget on net interest, or $400 billion in FY 2010.
What happens ‘when’, not ‘if’, interest rates go to 5%, 7%, or 10%+? We will be looking at net interest payments of over $1 trillion … per year … forever.
Here’s what we know about taxes: they can be raised or lowered by the legislative process in a new Congress every two years. So if they go up as a result of the Bush tax cuts expiring, they can be reduced one day when the deficits look like they are under control again.
But paying ever-escalating amounts of interest payments on a continually expanding debt can not be changed by legislative fiat. Once interest payments hit the ‘tipping point’ of out-running a nation’s (or a business or an individual for that matter) ability to make the debt service payments, ‘that is all she wrote’ if you look at history even in a passing manner.
And we think that is a devastating possibility no one wants to even come close to messing with.
We didn’t say this ‘Compromise’ was going to be ‘easy’ or ‘a marginal step’ or ‘an iteration’; we said it was going to be ‘massive’ and it is. But it would have the greatest chance of returning our federal budget to balance in the shortest amount of time and prevent our children from desecrating our tombstones after we slip these mortal coils of earth.
Because if we don’t do this, they will … and it will be deserved.
—————————
Frank Hill writes at TelemachusLeaps.
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Frank, you forgot three critical things, without which none of what you suggest will work.
1.) End the Iraq and Afghanistan occupations, and adopt a foreign policy based around defense of this nation and its borders, not on playing world policeman/nation-builder.
2.) Get a true audit of the Federal Reserve as a prelude to ending it.
3.) Repeal legal tender laws preventing a commodity-backed currency from competing with the dollar so that Bernanke and his buddies at the Fed can’t continue to finance spending through inflation. If the Fed can keep back-stopping federal spending, it won’t matter whether Congress stops borrowing and appropriating; we’ll still keep going into debt.
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adam is so correct in pointing out the need to strike the root of the problem;the federal reserve and its’ control and manipulation.the looter politicians and their stooges will never reform themselves.they must be cut off from the fiat monies which fuel their scams.
“The people will be crushed under the burden of taxes, loan after loan will be floated; after having drained the present, the State will devour the future.”
— Frédéric Bastiat
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I am not sure the Federal reserve would even matter much other than increasing the money supply each year to accommodate population growth IF our elected representatives were not spending so much money on the federal budget.
That is the real problem…not the Fed.
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I don’t think the founders envisioned anyone drawing social security regardless of their wealth. Buffet & Gates have been forced to contribute to social security. They should be allowed to withdraw what they are owed. Means test social security & you might as well rename it welfare.
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Frank, your statement shows a basic misunderstanding of what money is and the role it plays in society. If the Fed needs to increase the money supply every year to accommodate population growth, how did we become a prosperous nation before it existed? The Fed has only been around since 1913, but somehow we managed to settle the West and have an Industrial Revolution without it.
Yes, our elected representatives do spend way, way too much, far more than they take in. That is a huge problem. But what your statement overlooks is HOW they get away with doing that. The Fed enables that spending by allowing the spending of money not collected through taxes or through borrowing from China and Japan by debasing our currency to finance Congress’ schemes. To say that that’s not a big problem is just silly, and frankly, you should know better.
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hear,hear,adam;
“It is a cruel thought, that, when we feel ourselves standing on the firmest ground in every respect, the cursed arts of our secret enemies, combining with other causes, should effect, by depreciating our money, what the open arms of a powerful enemy could not.”
– Thomas Jefferson
oh,and, END THE FED
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adam:
with all due respect, your history is off..by about a century.
read all about the First National Bank of the US and the Second National Bank of the US…if they didn’t serve essentially the same function of extending credit across the new nation and stabilizing the currency, I don’t know what is then.
David and Jeanne Heidler’s very great book, “Henry Clay: The Essential American’ will help educate, edify and at times amaze you.
The problem is not the Federal Reserve. The problem is Congress over-spending its income in terms of tax revenues for the past 40 years.
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With all due respect to you, Frank, my history is not off.
The First Bank of the United States operated from 1791-1811, and was killed off by Thomas Jefferson. It came and went before the U.S.
The Second Bank of the United States operated from 1816-1836, and was killed off by Andrew Jackson.
In both instances, the main criticisms of these banks was that they led to speculation and created financial bubbles. Sound familiar?
The fact is, there was no central bank operating in the United States between 1836 and 1913…a 77-year period in which the West was settled, trans-continental railroads were built, powered flight and automobiles were invented, and the transition from an unindustrialized, agrarian society to a modern, urban one was begun. These changes came about because free people working with a sound, commodity-backed dollar were able to unleash their creative potential in ways never before seen in human history. And they did it without a bunch of unelected bureaucrats deciding the value of their money behind closed doors.
Professor Thomas Woods’ wonderful book, “Meltdown: A Free-Market Look At Why The Stock Market Collapsed, The Economy Tanked, and Government Bailouts Will Only Make Things Worse” will help educate you. Buy it here: http://www.amazon.com/Meltdown-Free-Market-Collapsed-Government-Bailouts/dp/1596985879
Since we’re talking history, I’d also direct you to this work by Woods, “The Politically Incorrect Guide to American History” See it here: http://www.amazon.com/Meltdown-Free-Market-Collapsed-Government-Bailouts/dp/1596985879
There is no one problem, Frank. There are a multitude of them, perpetuated by the political class in this country, and the Federal Reserve and it’s unaccountable policies are chief among them. Ignore it at your own peril, and ours.
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Correction above, regarding the First Bank of the United States. I meant to say, “It came and went before the U.S. industrialized.”
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Between 1836 and 1913, all was not rosy and peachy-keen either with regards to currency stabilization and economic recessions and setbacks without any centralized banking system, I must add.
In fact, right after the death of your ‘hated’ Second Bank of the US, Martin van Buren presided over one of the worst economic depressions this country has ever known such that he became know as ‘Martin van Ruin’ for his unsuccessful re-election efforts.
So much for blaming the central bank for all the troubles of the world.
And in 1857, there was that humdinger of a recession that almost is a direct mirror image of the one we are going through. Rampant land speculation; excessive real estate over-building; reckless lending practices by the banks…it is all as old as Cain and Abel.
But this one had the unique twist of being fueled by the gold rush out west. Wanna know what completely sunk the banks in 1857? When a shipment of gold was on a ship around South America and heading towards NYC so the banks could desperately balance the books betwixt them all, it sunk off the coast of good old Cape Hatteras, North Carolina, the ‘Graveyard of the Atlantic’, and 3 days later, the NYC banks all shuttered and within a week so did all the ones in PA/MD/OH and so on.
Is that really a better way to run a banking system?
I don’t dispute that there are some things wrong with the Fed. But I think you missed the main point of my argument: The main culprit in this current budget problem is the irresponsible overspending and deficit buildup authorized by Congress who keep getting re-elected by the American people who want ‘more, more more’ as long as they ‘pay less, less, less’ for all that spending.
You can blame the Fed all you want but that dog won’t hunt in this case. It is the debt, deficits and spending passed by Congress that needs to be fixed now. The Fed can be tinkered with later.
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tinkered with?
i’m assuming you have little knowledge of the federal reserve,it’s history,individuals invloved,etc.
i’d suggest the outstanding work from g.edward griffin;
http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986395/ref=sr_1_1?s=books&ie=UTF8&qid=1281594466&sr=1-1
another outstanding source for research is the ludwig von mises institute;
http://mises.org/
if you’re still a defender of the fractional reserve central banking system after,i’d be interested in what other planks of the communist manifesto you’d give intellectual defense to.
(this is a semi-serious question.)
oh,and END THE FED
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Hal:
If you feel compelled to assert that people who think the Federal Reserve has a useful role in the financial system of the United States of America are ‘communists’, does that make it easier or harder to convince people that it should be eliminated one day?
I am not an expert on the Federal Reserve, but I did sleep at a Holiday Inn last night so I guess that makes me about as much of an expert on it as perhaps you are. I have sat in on (suffered through is more like it) perhaps hundreds of hearings with Fed Chairman going back to Volcker through Greenspan and had many a meeting with their staffs over a 22-year period in and out of public service in Washington.
have you ever been to the Fed or met with any of their officials? There is a local branch right here in Charlotte were I am sure they would be glad to answer any and all of your questions about their operations.
My main problem with people who want to blame the Fed for all the ills of the nation is that they are completely missing the elephant in the bathroom: “The Over-Spending Proclivities of the US Congress through GOP and Democrat Majority Control!’
That is the first root of all evils and the one we can control the quickest.
I remember hearing Milton Friedman speak one time about monetary policy and the Fed (or is he a Bolshevik because he recognized the very existence of the Fed in modern day America?) and he said that at the very core level, the Fed could and probably should set a target for monetary growth of say, 3% to accommodate the growth of the population….and then go home.
But he would ALWAYS say this as well: ‘The problem is always associated with Congress not balancing their budgets because they are over-spending on every federal program!’
no one on this email chain has even acknowledged that deficits and debt are the biggest problems we face as a Republic which can only lead one to believe that you guys really do not care about deficits or debt at all.
I am willing to bet everyone on this email that if we abolished the Fed tomorrow, we would still have a monstrous debt to deal with and an explosive tinderbox of rising interest payments to make on it pretty darn soon.
I guess based on your hatred of the Fed, it would all just work itself out…just like it did(n’t) in the massive recessions of 1837, 1857, 1873, 1893 and 1907…all of which were times when there was no national Bank of the US or the Fed. (take a look and see for yourself: http://www.telemachusleaps.com/2010/06/what-do-american-financial-panics-of.html)
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hey,i put the caveat there;a “semi-serious question”. lol
my deliberate, slight obtuseness was meant to question the establishment doctrine that has gotten us to the point where we are.
how is it, that a leftist like barrck obama is president today?could one even consider that perhaps many of the most powerful and influential institutions could in fact support a political culture which has brought us this “delightful” hope and change.
i listen to alot of talk radio from all over the country.one pervailing sentiment from so many callers seems to be this feeling like “what happened”. so many folks are awaking to the realization that much of our lives are indeed intangled by the ,creeping at first,but now exploding volume of statism.
i didn’t claim to be an expert,though i did provide the work of one of the preeminent historians on the subject; g.edward griffin.
i certainly agree that outrageous spending,deficits,and debt are indeed the problem.
let me make this perfectly clear: DEFICIT SPENDING BAD
the point about the federal reserve is that it’s the institution set up to deliver those very deficits and debt you correctly identify as overwhelming us.
you can’t seriously believe from reading any austrian economists or their adherents that we don’t care about deficits or debt at all.i mean,come on,that’s just ridiculous.
quite frankly there is much worse than the elephant in the bathroom.it just might be the giant turd in the bathroom; i.e. this banking syndicate which seeks to centrally plan on a “global” scale.just in the last few days this story made the rounds;
http://www.ibtimes.com/articles/42944/20100812/tarp-bailout-banks.htm
now i’m no sherlock holmes, but “egads dr. hill, something appears to be rotten in denmark.”
i’m just having some trouble trying to comprehend why u.s. taxpayers are bailing out foreign banking houses.i would hope that someone would help ron paul and get some questions answered and an audit by the peoples’ congress.
as to abolishing the fed tomorrow,that may indeed be an interesting screen play,i’m certainly not advocating that we need to follow a twilight zone scenario where we have a magic wand and we’re all living in some parallel universe free of all debt and economic reality.
i’m certainly comfortable with following your timeline;
END THE SPENDING,END THE DEFICITS,END THE DEBT AND OH,END THE FED
i hope this has been worth the effort to discuss.i’m not the enemy, though i may indeed be a “hater” and “extremist.” lol
Extremism in the defense of liberty is no vice. And moderation in the pursuit of justice is no virtue.
Barry Goldwater
i’ve been meaning to read murray rothbards’ treatise on the panic of 1837.this has given me the impetus to move that up in the rotation.
thanks to pundit house for the forum.
Educate and inform the whole mass of the people… They are the only sure reliance for the preservation of our liberty.
Thomas Jefferson
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I would have to agree that the fractional reserve system is a large part of the problem. It would be difficult to borrow so much without the availability of imaginary money. This is one of the reasons for the collapse. As the assets lost value the banks and others using leveraged borrowing, had to make good on their margins. The whole of the TARP funds seemed exactly to that point. Generally the banks were solvent so far as cash flow, their balance sheets were off. Certainly there were individual banks with problems, but there will always be.
Both of you gentlemen are right and the resolution of one side of the issue will not repair the problem without resolution on the other side. None the less I defer to George Higgins and a few others who say “It’s too late”. The reason has to do with the attitude of the recipients of transfer payments.
Take Hugh’s statement above: (paraphrased) ‘Those who paid in should be able to get theirs out. Means testing makes Social Security welfare.’ Well what is it without means testing but a blatant transfer from the working class to the old age demographic? AH – Supplemental Household Income ‘Titlements. (S**T)
This though is the reason the problem will not be resolved. The attitude of give me mine, to the devil with the rest of you. And so we spiral into irrelevance.
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Lewis offers the first ‘real’ reason why the Fed is ‘bad’ and complicit in any or all of this in the first place:
‘being able to print (manufacture now we expand balance sheets and not run the printing presses dry with paper currency) money and act as the world’s reserve currency’
it gives Americans the (false) illusion that ‘all we gotta do is spend more money and nothing bad will ever happen to us because, well….because we are Americans, that’s why!’
Read Donald Kaga’s great and eminently-readable and enjoyable version of ‘The Peloponessian War’, based mostly on the Thucydides version but it reads almost like a modern-day novel or at least a great historical fiction like Shaara’s ‘Gods and Generals’
except it most definitely was NOT fiction….it all happened. And the lesson for us today is that when their gold reserves dwindled or expired, they could not pay their soldiers or rowers and they lost the next battle or surrendered without a fight.
that is how profligacy was usually rewarded in ancient times….the times all of our Founders were more than well-schooled in because they read Thucydides in his original Greek and all the other texts in Latin or Greek.
so my guess is that this episode of profligacy and idiocy will eventually be turned around the moment the Chinese say: “We are not going to buy any more of your debt, kind sirs until your budget is on the road to balance.,…and we believe it”…and then all hell will break loose when interest rates spike, people march in the street for their government checks and then we finally are wrestled to the mat like the Greek government has been lately……
And then we will have learned our lesson (hopefully) and go on being the greatest nation on the face of this planet.
America survived the Civil War, for goodness sakes! And the Depression! And WWII!
This is mousenuts compared to all of those. We Boomers and modern-day Americans are just not as tough as our forefathers and ancestors, that is the reason why this ‘feels so bad’ to us softie couch potatoes that we are.
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