We already know that legalizing the vices of drugs, gambling, and prostitution could bring in around $100 billion a year . Yet with a budget shortfall of $1.6 trillion, that’s not going to solve the entire problem.
The main engines that drive the federal deficit are the massive expenditures on defense, Social Security and Medicare/Medicaid. Nothing will get done until these are addressed.
1. Get out of Iraq and Afghanistan
In 2008, the budget for Iraq and Afghanistan was over $180 billion. After Obama took office, he decided to increase troop levels in Afghanistan. In 2009 and 2010, we will continue to spend $130-$150 billion on wars.
There are plans to reduce troop levels in both countries over the coming years, but planning to leave and actually leaving are two different things. Take into account hidden costs like the future medical costs of caring for wounded soldiers and the interest on the money borrowed to pay for the war, and a savings of $150 billion a year is conservative.
Savings: $150 billion per year.
2. Slash the defense budget
The United states spends around $660 billion per year on the military. In 2006, the United States accounted for nearly half of the world’s total military spending. We spent as much in that year as the next 15 countries combined.
In 2008, we outspent China by more than 6 to 1, and Russia by more than 10 to 1.
Surely we can reduce our military spending without inviting immediate invasion. $500 billion should be more than enough to keep us safe.
Savings: $160 billion a year.
Now that I’ve made all the Republicans angry, it’s time to piss off the Democrats.
3. Means testing for Social Security
We spent nearly $700 billion a year on Social Security. What started as a voluntary program to ease the burden of retirement during the Great Depression has now become a bloated entitlement program that eats at the heart of our budget.
Social Security plays an important role in providing for the financial security of the elderly, with some estimates arguing that Social Security keeps roughly 40% of Americans age 65 or older above the poverty line.
Today, Social Security payments go to 51 million Americans at the cost of $650 billion per year.
Suppose we adopted a sliding scale that allowed most people to keep most of their benefits, but eliminated benefits to the top 20% of richest retirees. There would be savings along the line, but just for a low estimate, we’ll take 20% of $700 billion, for a nice savings of $140 billion a year. It is also possible to begin moving the age of benefits upward, from 65 to 67 or 70, as life spans get longer and workers stay productive for more years.
Savings: $140 billion per year.
4. Real Health Care Reform
I tend to think that there are several ways to go about this. Countries in Western Europe spend a much lower percentage of GDP on health and get better results.
Although their systems save costs, many Americans are concerned with government programs. There are also free market approaches which attack fee-for-service medicine and insurance monopolies. There are Health Savings accounts. There are any number of valid ways to reform health care.
If other countries can maintain their health for 8-12% of GDP, instead of the 16% the US spends, we should be able to as well. With a GDP of $14.2 trillion, even a 1% change is worth $142 billion.
Savings: $142 billion
5. Cut all other government programs by 5%
Your favorite program will get cut. Mine will too (it’s NASA). By cutting every program, you avoid a lot of political bickering over which programs deserve it more. The truth is, there are many deserving programs, but we can’t afford to pay for them all.
Programs other than defense, SS, health, and interest on the debt account for about 1/3 of the budget. For a $3.55 trillion budget, that leaves about $1.2 trillion in other spending. Cutting 5% saves $60 billion.
Savings: $60 billion per year
6. Eliminate the Bush tax cuts
Obama will allow the costly Bush tax cuts to expire in 2010. This will increase tax receipts by $110 billion a year.
Savings: $110 billion per year
7. End corporate welfare
The federal government spent $92 billion in direct and indirect subsidies to businesses and private- sector corporate entities — expenditures commonly referred to as “corporate welfare” — in fiscal year 2006.
Let’s be optimistic and say that half of this money is well spent. We’ll cut the other half and save $50 billion a year.
Savings: $50 billion per year
These 7 ideas, combined with ending the war on drugs, will reduce the deficit by about $900 billion, from $1.6 trillion to $700 billion. $700 billion is still a lot of money to borrow every year. Here are three more ideas to generate revenue.
8. Raise taxes
People will howl. The US government already takes in over $1 trillion in income taxes and nearly that in Social Security and payroll taxes. The total revenue for the Federal Government is $2.381 trillion. An increase of 4.2% would generate an additional $100 billion.
Fareed Zakaria suggests a Value Added Tax, which is basically a national sales tax. He estimates it could bring in hundreds of billions of dollars a year, even with corresponding reductions in income tax.
Either way you do it, we have to generate more money.
Revenue: $100 billion.
9. Invest in the future
This is one of the paradoxical ideas of debt reduction. In order to generate growth, sometimes the federal government has to pave the way by investing in infrastructure and new technology.
Revenue: ???
10. Grow, baby, Grow
Economic growth has always been the engine that propelled the American economy out of trouble. The US was in steep debt after WWII, but that was followed by the prosperity of the 1950s. With a GDP of $14.2 trillion, even modest percentage growth will increase tax revenue and help the government climb out of debt.
I’m not an economist. Some of these ideas may not work. Many, and perhaps all of them, are politically impossible. Still, we must do something to avoid bequeathing a crippling debt and shattered economy to future generations.
One more suggestion: Tax 100% of the money paid to lobbyists. So, if a company spends $100,000 on a lobby program; $100,000 would be paid in taxes..
huh! thats unbelivable!
We could sell off a portion of our federal lands.
There is one thing you overlooked with Social Security. Get rid of the income cap on SS withholding. If you did that, you could probably do away with means testing (though I would keep that too).
All good ideas but none will work unless you install a true Glass-Steagel act of separating the commercial banks from speculative banks to keep them from dipping into the fed discount window and tax payer bailouts. Oh and then write off the gambling debt that we are still trying to pay off as if it is a legitimate debt. It is leaching productive capital that we need for a true physical economy. The end