Could you support a debt reduction plan like this?

[Zyphlin]

This is something I had posted up on another forum while DP was down, in a thread asking about what is worse...debt or taxes. This was my thought and its a general idea I had in regards to a way to potentially pay down our debt. I'd like to hear thoughts from Democrats/Republicans/Independents on whether or not they like or could get behind such an idea. Here’s the general proposal…

First and foremost entitlement programs like Social Security and Medicare would need to be given a serious look and serious reform. With SS, likely with some kind of age-based optional opt out and mandatory opt out, and dedicated funds from its taxes to keep it from being used in other expenses. With medicare likely a tightening of the requirements surrounding it. With both an upping of the minimum age. These two singular expenses account for a larger portion of our budget, and thus what causes us to go into debt, than any other thing. To talk about taxes, or even general spending cuts, when discussing the debt is ignoring the giant elephant in the room which are these two mammoths.

Second, spending cuts would be needed and an actual legitimate limit would need to be placed rather than the continual "emergency spending" that every administration uses for rather none emergency stuff. Rather than the federal budget increasing every year we need to see a backwards trend. Now, I'll be realistic here. Some of these cuts DO have to come from the military, but in a proportional way. For example the military shouldn't have its budget slashed by 15% while foreign aid, art grants, and welfare is cut a combined 1%. If we're going to be serious about getting down the debt we need to cut the fat and while there is some fat in the military ultimately it is an essential program of the Federal Government, where as there are other programs that have a good deal more "fat" to them in regards to them being a luxury not a necessity for the government. However, I think there should not be a single solitary sector of government that does not fill the criteria for some kind of budget cut.

As such I would adjust the current budget for inflation, and then give every program/agency a 1% budget cut to begin this. After that additional cuts to programs and agencies could be applied. I would suggest the percentage of the budget cut from these various sectors should remain within about a +-3% range from each other so it doesn't become to politicized that one things being cut over another. The other alternative to cuts would be that if there’s anything so strikingly full of “Fat” that it would need a greater cut then it should be looked at as something to possibly remove entirely.

Third, would come taxes of some sort. If the desire is to pay down the debt then these taxes should clearly, and unchangingly, exist only to such a point that the debt is paid down. Additionally, it should be unchangingly tied directly to the spending decreases. What I mean by this is that if the government, in accordance with number 2, cuts their budget and sticks to it then the “paying down the debt tax” would be valid and in effect the following year. If the government goes over that budget for the year then the following year the "paying down the debt tax" would be invalid and not apply, and would not return until the following year IF the government maintained proper spending.

To put another way....

2010 – Legislation passes. Debt Tax in place; Government ends up spending more than their budget allowed
2011 - Debt Tax suspended; Govenment ends up spending more than their budget allowed
2012- Debt tax suspended; Govenement ends up spending less than their budget allowed
2013 - Debt tax in place

This does a few things...

For those that think controlling spending is the solution and dislike taxes, then it guarantee’s the later only happens if the former does.
For those that think taxes are going to be the best way out of this but think politicians won’t cut spending, it provides a situation where it gives politicians a reason to cut spending to get that tax.
If the government upholds its end of the bargain we end up addressing the debt both by reduction in spending and in increased taxes, thus hopefully paying the debt off quicker.

In regards to the tax I think it'd needs to be tailored in a specific way. The debt is on ALL American's shoulder's and the tax should apply to everyone. I would personally suggest you do a 2% sales tax that would apply to everything but non-alcoholic/tobacco groceries. This money would be earmarked to go to paying down the debt and ONLY paying down the debt, meaning the government could not touch that money for any other program.

While small, to give you an indication of the impact I'll look at one sector of the economy that one would imagine is a rather small niche market; video games. American's spend $25.3 billion each year on video games, meaning a the tax on them alone would generate just over half a billion dollars towards the debt.

At 2% it is low enough that it should not as a disincentive to spending in any large degree. By making it earmarked specifically to the debt those against tax increases do not have to worry about it being spent for other government programs and entitlements. With it not applying to grocery purchases this would not have a large impact on "the poor" being unable to have necessary sustenance, and with it being a sales tax it should not have a large impact on their ability for renting housing for shelter. What impact it would have would be relatively small, again, due to being only 2% and that amount being minor on lower dollar items. However, it would still end up pulling far more money from "the rich" than it would the poor due to the fact "The Rich" tend to both buy a higher quantity of, and more expensive, luxury items which would be affected by this tax. It would also not discriminate from those that are "Rich" who make it through things that normal income tax would not hit.

It would also provide a nice economic boosting mechanism for the point where the debt is reduced, as the removal of the tax would generate an across the board lowering of the cost of living for people.

So essentially...

• Reform of Social Security and Medicare first and foremost to lower the budgetary burden it presents, with the goal in regards to the first one to eventually have it removed within a couple of decades or have a more fiscally manageable version in place.
• Reduce the budget across the board by 1%, with additional cuts or program removals where needed and remaining within a total +-3% variation.
• Implement a small sales tax reserved directly for paying down the debt.
• Tie the tax’s validity directly to the reduction of spending in hopes of guaranteeing the spending cuts are more likely to occur
• 
  
  Could something using this as a generic foundation be an agreeable compromise between all sides on how to deal with what is without question a massive issue in our country?

 

[rathi]

I would support it. While I don't agree with everything in it, its close enough to get the job done. I particularly like the concept of taxes that exist purely to pay down the debt. However, I would modify the system so the tax is applied after the year debt goes up and sticks around until debt is at least neutral.

 

[Slartibartfast]

I agree with the general themes. We are going to have to go through an austerity period where taxes go up and benefits go down. However, I am not so sure about the tax portion of the implementation. If anything I think it might work better in reverse.

Taxes automatically go up in proportion to spending and the debt is paid off at a constant rate with the goal of paying off the debt in a certain amount of time (lets say 10 years for the sake of the example). So every year 10% of the initial principal must be paid in addition to automatic taxation assessed for whatever spending. Debt taxation should be felt by all citizens. We are all going to need to pitch in to get out of this mess at this point. Also if this taxation was kept, than it should trigger automatic tax increases when spending goes up.

At that point, we, as citizens, hopefully will take a hard look at what we really need and make the hard choices. Probably what will happen though is that politics will get even nastier as we fight over set resources for our own personal policy goals.

 

[Zyphlin]

Except what you're proposing is the exact opposite of what I am and is something that frankly will never likely happen, from what I'm understanding. Whether than attempting to finding a plan that can reach out to both sides by giving nods to both of thier suggested methods, you're simply throwing out a completely liberal focused plan where "spending goes up and taxes goes up" that's doomed to fail in regards to actually getting passed and having significant support of the people because it basically throws the middle finger to the other side, the exact thing the proposal outlined above is attempting to avoid by tieing both the notion of "we need to increase taxes" and "we need to cut spending" together and making them reliant on each other thus giving a higher chance that both will be done as the only other alternative is for neither to be done under that plan.

I personally would refuse any plan that had no limits or cap on spending and worked to actually force spending to go in reverse from where it is currently, yet impliments and continually increasing tax, because its essentially the government lying to our face by using the erroneous notion that "cutting spending" is impossible so the ONLY other alternative is raising taxes (The very dishonest and ignorant assumption that predicated the initial poll on another cite).

There is not only two options...debt or taxes. Cutting spending is a legitimate option. Continually to raise taxes without cutting spending is just going to delay the inevitable as it will not truly successfully cut down on the debt in any real way before it gets so oppresively high that it creates a whole host of other issues in and of itself.

 

[Redress]

Some of your plan is good, some I don't like as much. I agree that something needs to be done with SS and medicare. I am not so sure that your plan is the way to do it. Medicare especially is part of why we do need health care reform(leaving aside the question of whether the current plan is the right reform), since as long as health care costs increase at the rate they are(Don in another thread posted numbers, and they are scary), it's going to exist as a big problem and a big drain.

I don't agree with making spending cuts roughly equal. I understand your reasoning, but some programs have a lot more that can be cut than others. I think we need to put together bipartisan groups to look at all programs, all spending(think the Base Closure Commission during Bush the elder and Clinton's terms in office), and have them make a set of proposals for each program, divided into A)things to reduce cost without reducing what the program does(efficiency improvements and such), B)things that reduce cost with a modest reduction in what the program does, and C) things that reduce cost with a large reduction in what the program does. Once this is done across the board(no program sacred), look at how much each category saves and decide which category to pick across the board(I suspect B). Simply cutting across the board by a certain percentage is highly inefficient. My way takes longer to set up, but you get the most bang for your buck.

I also think that since your program requires politicians to have spines, and do what is right, the extra mechanic on taxes is unneeded. If it is needed, we are still in trouble, since you can bet congress will use bookkeeping tricks and/or reduce debt by a total of 1 dollar to keep it in place.

 

[Slartibartfast]

Except what you're proposing is the exact opposite of what I am and is something that frankly will never likely happen, from what I'm understanding. Whether than attempting to finding a plan that can reach out to both sides by giving nods to both of thier suggested methods, you're simply throwing out a completely liberal focused plan where "spending goes up and taxes goes up" that's doomed to fail in regards to actually getting passed and having significant support of the people because it basically throws the middle finger to the other side, the exact thing the proposal outlined above is attempting to avoid by tieing both the notion of "we need to increase taxes" and "we need to cut spending" together and making them reliant on each other thus giving a higher chance that both will be done as the only other alternative is for neither to be done under that plan.

I personally would refuse any plan that had no limits or cap on spending and worked to actually force spending to go in reverse from where it is currently, yet impliments and continually increasing tax, because its essentially the government lying to our face by using the erroneous notion that "cutting spending" is impossible so the ONLY other alternative is raising taxes (The very dishonest and ignorant assumption that predicated the initial poll on another cite).

There is not only two options...debt or taxes. Cutting spending is a legitimate option. Continually to raise taxes without cutting spending is just going to delay the inevitable as it will not truly successfully cut down on the debt in any real way before it gets so oppresively high that it creates a whole host of other issues in and of itself.

I know, you are trying to make it palitable to more people and I applaud that, but I personally don't think it would work because I don't see where people would follow the plan as it is voluntary and if voluntary worked, we wouldn't be in this mess. I just don't think people work in such a way that they will be able to follow any sort of plan like this, we are our own worst enemies in this regard I think and we will only begin to do something concrete once the axe is visibly falling and we are in a position where we have no other choices left.

I agree that spending will have to go down and taxes will have to go up, but I think ultimately, we are going to either have to put a plan in place that cannot be disregarded (make it so you have to get 90 senate votes to repeal or something) or we will eventually get into a panicked position like greece and do major things that may or may not have been well thought out in the long run.

 

[ronpaulvoter]

I disagree with most of this proposal.

My top priority would be to CUT SPENDING.

The very first thing I would do is eliminate the numerous unnecessary and counterproductive government programs and departments. At the top of the list would be the dangerous ones like the DEA, ATF, EPA, OSHA, EEOC, and numerous others. Not only would we save the billions spent on them, but relieved of these burdens, the American economy would gain a gigantic economic stimulus from the relief from "compliance costs."

I would eliminate all programs and enforcement of laws that violate people's individual rights, including eliminating "crimes" that have no victims.

Next, I would eliminate all of the meddlesome and counterproductive foreign policy programs. That would include everything from foreign aid to disaster relief to needless "wars" and military interventions.

I would eliminate all DOD functions that do not have legitimate defense purposes.

I would eliminate using federal funds for state and local programs and projects. nearly all of these are useless, and many are worse than useless.

I do agree that Social Security and Medicare (both giant Ponzi schemes), along with ALL other social-welfare programs, are illegitimate functions of government. Getting rid of all of these ASAP would be a great move.

However, some compensation would have to be made to the hundreds of millions who paid FICA taxes for many years, and done in a fair way. Unfortunately, due to the nature of Ponzi schemes, full compensation is impossible.

One thing I would NEVER do is raise taxes. Remember the Laffer Curve. Take a look at it. We are on its back side. The more we raise taxes, the lower the GNP. Then tax revenues actually fall. Instead of raising taxes, I would CUT them as soon as I finished my spending cuts.

I would also simplify the tax code (abolish the income tax and adopt the FairTax), but at a much lower rate than the current proposal.

And I would never approve a budget that exceeded the previous year's tax receipts.

 

[Redress]

I don't think I have ever heard of OSHA referred to as dangerous before.

 

[Kandahar]

We're going to need to reform entitlements. As you mentioned, means-testing social security and raising the retirement age are good things. Medicare...not so much. The solution here isn't to throw people off the health care rolls, as that isn't good for the economy in the long term. A better solution is to address the fundamental reasons why health care is so expensive (lack of competition, AMA monopolization of the health care labor market, health insurance tied to employment, and low-deductible health insurance policies). We should be correcting those, while at the same time acknowledging that any given level of health care will become cheaper over time on its own, due to improving medical technology.

As for paying down the debt, my main question is: why? Why do we need to pay down the debt? Running a surplus is bad for the economy, because it means high taxes and low spending. I'd rather simply grow our economy out of the problem. For example, if we run an average deficit of 1% and grow our economy at an average of 3%, then over time our debt-to-GDP ratio will decline.

 

[ronpaulvoter]

We're going to need to reform entitlements. As you mentioned, means-testing social security and raising the retirement age are good things. Medicare...not so much. The solution here isn't to throw people off the health care rolls, as that isn't good for the economy in the long term. A better solution is to address the fundamental reasons why health care is so expensive (lack of competition, AMA monopolization of the health care labor market, health insurance tied to employment, and low-deductible health insurance policies). We should be correcting those, while at the same time acknowledging that any given level of health care will become cheaper over time on its own, due to improving medical technology.

As for paying down the debt, my main question is: why? Why do we need to pay down the debt? Running a surplus is bad for the economy, because it means high taxes and low spending. I'd rather simply grow our economy out of the problem. For example, if we run an average deficit of 1% and grow our economy at an average of 3%, then over time our debt-to-GDP ratio will decline.

The biggest entitlement reform needed is the elimination of welfare parasites--people who vote for their livings rather than working for them--who instead just draw public housing, medical care, education, food, etc at the taxpayers' expense and often have large families for exponential growth of new generations of welfare parasites.

How is a surplus bad for the economy? Of course high taxes are bad, but if you have a surplus, reducing them is much easier. Low spending is a good thing. As a general rule, the lower the spending and the smaller the government, the better. A small government is much easier to manage and is much less corrupt. The fewer regulations and mandates, the stronger the economy.

On the other hand, whenever we have a deficit, we have inflation to make the difference. It is like someone stealing money out of everybody's bank account.

 

[rathi]

Except what you're proposing is the exact opposite of what I am and is something that frankly will never likely happen, from what I'm understanding. Whether than attempting to finding a plan that can reach out to both sides by giving nods to both of thier suggested methods, you're simply throwing out a completely liberal focused plan where "spending goes up and taxes goes up" that's doomed to fail in regards to actually getting passed and having significant support of the people because it basically throws the middle finger to the other side, the exact thing the proposal outlined above is attempting to avoid by tieing both the notion of "we need to increase taxes" and "we need to cut spending" together and making them reliant on each other thus giving a higher chance that both will be done as the only other alternative is for neither to be done under that plan.

My plan makes it possible for both parties to enact their brand of debt balancing. Democrats get higher taxes and lower spending, republicans get lower spending and lower taxes. Your plan provides incentives for the wrong behavior, overspending gets a tax cut, while fiscal responsibility results in higher taxes.

I understand your concern about taxes skyrocketing to pay for absurd spending. However, you are discounting how unpopular increased taxation is. Our current level of spending is mostly based on the fact that we have completely divorced the idea of actually paying for our services and wars. Make the people feel a little pain every time they get more expenditures, and they will quickly become unwilling to support stuff they don't really really need.

 

[Zyphlin]

I disagree with most of this proposal.

My top priority would be to CUT SPENDING.

....

All well and good....but entirely unfeasible and utterly impossible to ever happen. Perhaps if the country was a monarchy you'd have a shot at this. As it is, your proposal of how to fix the issue would be as realistic as stating that ones proposal is to funnel our funds into creating a renewal resource that can enable fusion power to then sell it to all the countries we are in debt to for the elimination of the debt. If you're going for absolutely 100% impossible things with regards to the current climate why not at least go big?

The purpose of my proposal was to suggest something relatively moderate enough and touching both sides ideal views enough to potentially have a legitimate chance, or at least a reasonable outside one, of actually being something possible in todays world rather than something completely and utterly ideologically based that has no actual foothold in that thing called reality.

 

[Zyphlin]

My plan makes it possible for both parties to enact their brand of debt balancing. Democrats get higher taxes and lower spending, republicans get lower spending and lower taxes. Your plan provides incentives for the wrong behavior, overspending gets a tax cut, while fiscal responsibility results in higher taxes.

I understand your concern about taxes skyrocketing to pay for absurd spending. However, you are discounting how unpopular increased taxation is. Our current level of spending is mostly based on the fact that we have completely divorced the idea of actually paying for our services and wars. Make the people feel a little pain every time they get more expenditures, and they will quickly become unwilling to support stuff they don't really really need.

Your issue would make complete and utter sense...if we were a direct democracy. If that was the case then you're absolutely right, we'd be providing a disincentive fiscal responsibility for what most people prefer for themselves (low taxes). However we're not a direct democracy, we're a representative republic. People in this country are getting more and more into the mindset that they want spending to be controlled AND they want to get rid of our debt. The problem is the political classes answer to this on the left is often is more and more taxes. The right is against taxes for the most part, but is almost as bad as the other side with regards to spending. What is a disincentive for a direct democracy is an INCENTIVE for the typical politician, as in regards to Democrats the hope is an extra tax is worth it to cut the budget, for Republicans a small extra tax is worth it to cut the budget, and for both the overwhelming desire by Americans for reduced spending and paying down the debt will make both parties hold to it.

I disagree with your suggestion that taxes skyrocketing is unpopular. YOUR taxes skyrocketing is unpopular, however as the past few years various races have shown scape goating "other people" such as "The rich" in regards to taxes going up is not just unpopular but is something to even built a platform around.

 

[rathi]

People in this country are getting more and more into the mindset that they want spending to be controlled AND they want to get rid of our debt.

I would fundamentally disagree with that statement. Voters may say they want controlled spending, but they refuse to accept that means cutting social security, medicare and defense. Politicians are doing what the electorate wants for once. It has gotten to the point where conservatives ended up championing medicare. Libertarians are the only group calling for meaningful cuts, but they lack the ability to win elections.

I disagree with your suggestion that taxes skyrocketing is unpopular. YOUR taxes skyrocketing is unpopular, however as the past few years various races have shown scape goating "other people" such as "The rich" in regards to taxes going up is not just unpopular but is something to even built a platform around.

The beauty of the sales tax you outlined is that it does hit the general public rather than shifting the burden elsewhere. Everyone would see the impact of their national spending habits every time they go the store.

 

[pragmatic]

Didn't scrutinize the details as closely as i should have. Concepts are good. But applying to reality suffers when we get to the core of the need. Which is spending cuts. SS and Medicare are the elephants in the room. And our Congress pricks are going to be resistant to touch anything that could or would impact their next re-election.

The tragedy is that our nation is currently on an unsustainable path that requires leadership that can address a long term plan. But we continue to elect legislators that are consumed with the primary goal of simply holding on to power. Which by definition is a 2 or 6 year goal.

The long term solution requires some short term pain and telling people things they don't want to hear. Just don't see Washington stepping up to that task anytime soon....






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