Sunday, July 31, 2011

The National Debt Ceiling Phony Deal

After two weeks of drama and name calling, Socialists and Republicans in Congress and Socialist President Obama have reached a phony, face saving deal to raise the National Debt Ceiling by a reported $2.4 trillion, the highest increase in the Debt Ceiling in American history.  Supposedly, there will be cuts in spending equal to the amount of the Debt Ceiling increase.  If it happens, spending will be cut by $2.4 trillion over ten years.  About a trillion dollars of that number will come from the whined down of the war in Iraq and Afghanistan that was going to happen anyway.  Unless the Congress takes action by November, the rest of the cuts will automatically come 50% from Defense, which will hollow out our military negatively impacting our National Defense and 50% from cuts to payments to Medicare providers.  Since there are many doctors that will not take Medicare patients now because the payments are so low, this is another crazy idea.  Notice, there is no plan to cut the size of the federal government in this "compromise".  Big Deal!  

Obama has raised federal spending by 25% since taking office and spending is still going up 8% a year.  Federal government spending is now 25% of GDP.  As such, the base line is far above where federal spending was during the Bush II years.   This $2.4 trillion cut in spending, if that is the number that is finalized in the "deal",  if it ever happens, will only be about 5% of growing deficit spending over 10 years.   This "deal" will still result in adding $7 to $8 trillion or more to the National Debt in the next ten years, assuming interest rates do not go up dramatically, which is likely and the country is not bankrupt before then.  This is still fiscal insanity and just more smoke and mirrors.   There are no real cuts to spending in this deal.   If allowed to do so,  the federal government will continue growing under this deal.   That is a road to bankruptcy. 

This spending cut is peanuts and will do nothing to stop the trillions in deficit spending planned by the Socialists, nor will this plan do anything to pay off our National Debt and avoid the bankruptcy of our nation.   Some Republicans and all Socialists, including the President, have no business experience and live in a dream world.   The rating agencies will surely downgrade the credit rating of the United States if this deficit spending continues.   It is coming sooner than later.   Once that happens, the capital markets will just say NO by demanding much higher interest rates to loan money to the federal government.   We cannot continue borrowing 40 cents for every dollar that we spend for years to come.  The Chinese that hold a trillion dollars of our debt already will soon close their check books out of fear of default.   Who could blame them?   Greece is the word and if this deficit spending does not stop, we will become Greece complete with civil strife on our streets.  

There is no way to stop the trillions in deficit spending, under Obama, without dealing with entitlements.  Higher taxes, as always proposed by Socialists, will do little to solve the spending problem. The retirement age for full Social Security benefits must be raised to 68 years old for those 55 years or younger.  Social Security benefits for current recipients should only be increased if the Consumer Price Index is more than 3%.   Medicare must be means tested for all recipients NOW.   It is already happening.  Those that can afford to pay more for Medicare should pay higher premiums.  Life will not end.   Medicaid should be formulated to an appropriate percentage of federal revenues and then block granted to the states, based on population, for them to manage.  All of this is just common sense. 

Then we need a hiring freeze to shrink the federal government by 500,000 employees from the current 2.65 million civilian employees.  This will happen over five years by retirements and normal attrition; not lay offs.  No doubt, various redundant wasteful programs, departments, agencies and commissions will have to be eliminated over the next five years.   Believe me, no one will notice and we will all be better off for it.  And, the compensation and benefits for remaining federal employees and all government employees at all levels must be brought in line with private sector practices.  There is no reason that government employees should receive total compensation and benefits that are 20% - 40% more than people working in comparable jobs in the private sector.  That is just plain stealing from the American taxpayer. 

Finally, we need tax reform to get rid of most deductions, subsidies and loop holes; but in exchange the personal tax rates should come down to 5%, 10%, 15% and 20% as the top rate.  The first $35,000 of income should be exempted from tax to protect the poor.  We should not eliminate the charitable deductions at all because they bring value to our society.   The mortgage deduction, which distorts real estate markets, could be eliminated over ten years to give current homeowners time to adjust.  Capital gains and dividends should be taxed at 10%.  The current Estate Tax allowing individuals to provide their heirs up to $5 million should continue and be indexed to keep up with inflation.   This protects the family farm and small businesses. 

Corporate tax rates should be reduced from the current 35%, the second highest in the world, to just 20% to encourage more job creation in the United States.   This is about average around the world.  In exchange, any goodies going to business should be eliminated including subsidies for green technologies.  And, there should be a 5% corporate income tax on repatriation of foreign profits, rather than regular rates, to encourage American companies to bring profits home for investment in the US.  Keep in mind, American companies have already paid taxes on these profits overseas.   If the United States were to adopt this tax plan, we would see terrific economic growth and job creation in the US once again.   The federal government would be flush in new revenues allowing us to pay off our National Debt. 

Most important, we must enact a Balanced Budget Constitutional Amendment to insure that the deficit spending, that is bankrupting our country, stops once and for all.   Federal government spending should be capped at no more than 17 or 18% of GDP by law in the Constitution.  Unless there is a Declared War, or National Emergency, approved by two thirds or maybe three fourths of the states, the federal government should be prohibited from borrowing money to fund expenses.  This would allow for some flexibility related to a Balanced Budget Amendment; but make it very hard to borrow money to fund programs just to buy votes. 

We have got to get our fiscal house in order.   Phony deals and contrived crisis's will not do it.  The common sense ideas put forth by this Blogger would do it.  It is highly doubtful that Socialists, including President Obama, would ever agree to many of the things listed.  Socialists need to provide goodies to their PEEP's, those that pay no income taxes at all, those on the dole, illegal aliens, public employee and other union members, and favored industries that contribute to Socialist campaigns in order to win elections.   In other words, Socialists must support those feeding at the trough to stay in office.   And, we must secure our border.   We cannot continue being Mexico's welfare system any longer. 

WE THE PEOPLE have had enough!!   We must sweep these Socialists out of office in 2012 and 2014 to put our fiscal house in order and prevent the bankruptcy of our nation.   It will not happen any other way.  We must take back our country to preserve our freedom, our nation and way of life for the sake of our children and grandchildren.   We can do it.  We must do it.   The phony deal, related to the National Debt Ceiling, with phony triggers and Committees to review spending cuts, will just give Obama another $2.4 trillion to add to our National Debt.   In the next 24 months, we will see our National Debt grow from $14.3 trillion to $16.7 trillion dollars.  Obama is borrowing $4 billion a day to fund his Socialist Schemes and it will only continue under this "deal".   How can that be good for our country?  

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