To now, I have avoided the urge to jump into the impending financial crisis controversy brewing in Washington. Frankly, the manner that our president and legislators do the people’s business has become tiresome and unproductive. Compromise, the basis or our government for 200+ years, is a thing of the past having been replaced with lies, distortions, name-calling, and self-promotion.
Both sides are playing the blame game and eschewing comity to make political points. And so, I welcome the sequestration and am anxious to observe its impact on the economy. Predictions affiliated with this next “fiscal cliff” are grossly overstated. It should be noted that sequestration was manufactured by both parties and endorsed by the president. It is a doomsday mechanism, which is supposed to cause pain and suffering if compromise continues to be elusive. It is a moronic concept invented by our elected officials who obviously have no idea how to govern or enact laws.
The numbers associated with the sequestration are small change compared to the magnitude of our nation’s annual expenditures and the debt problem afflicting this country. For instance, claims that our national defense is going to deteriorate are absolute rubbish. Really, will a 5% reduction in defense spending in the most wasteful branch of our government cause the military to be unprepared to meet its mission? And, cuts to unproductive social programs will not take food out of the mouths of babies; it will save the taxpayers some money.
The problem with developing a huge slate of new revenue sources and spending cuts is that it is too complex for the simpletons in Congress to conceptualize, negotiate, and implement. I used to think some of the greatest minds in America gravitated to Washington annually to participate in public service. My bubble has burst, and now I think federal government bureaucrats are incompetent. The ultimate decision makers cannot come to grips with even the smallest issues.
And so, I recommend “going big and simple.” Let’s face it, a nickel and dime approach is not going to work in Washington. We really need a grand bargain that has real balance and would enable both sides to claim victory. By grand bargain, I refer to large spending cuts coupled with revenue increases that can easily be found in the fertile area of tax benefits and loopholes (dealing with the lobbying groups that defend these benefits is another matter). The latter, together with a focus on entitlement reform would give this grand bargain the balance that everyone wants.
My plan has four revenue-producing proposals and two large spending cuts. Revenue-producing proposals would include:
1. Americans with a net worth greater than $1 million would not receive any Social Security benefits when they reach the qualifying age. Social Security payments for most people are about $1,200 per month. This amount is inconsequential to anyone with a high net worth.
2. Wealthy people with a net worth over $1 million would receive only “catastrophic” Medicare coverage. Catastrophic would be defined as those events that could materially impact the financial security of a person such a long-term hospital stay, extended intensive care, and major surgeries. All day-to-day coverage would cease.
3. Certain benefits and loopholes would be capped or eliminated. For instance, lower capital gains rates are meaningful to only the “super rich.” It is a myth that Americans who earn up to $5 million in ordinary income annually have significant capital gains. People with very large estates are the ones that receive the lion's share of benefit from capital gains; but they need them the least. Other items that might be impacted could include charitable contributions and detectability of housing interest and taxes.
4. Payroll taxes would be payable on income up to $500,000.
Entitlement cuts would include the following:
5. Social Security payments would begin for all seniors at age 65, up from 62 for all those currently under 57 years of age. This would result in a huge decrease in the outflow of cash during the next decade.
6. Increase Medicare deductibles by 5 percentage points (ie., if a deductible is 10%, it would increase to 15%). This would have an immediate cash flow impact and serve to offset some of the cost of Obamacare, which will increase costs by far more than $1 trillion for a small part of the population.
Are these suggestions earth shattering? Not really, but all the naysayers will say they are. Our nation needs an elixir as soon as possible for its overspending affliction. The deficit will destroy the financial and health care safety nets for our young people if reform is not implemented immediately. My plan is balanced and spreads the pain over all Americans while redistributing some amount of wealth from the rich to the middle class.