Our Veterans’ enduring sacrifices to defend our liberty, free choice, and opportunity inspire and demand a concomitant sacrifice from the American people to solve our nation’s fiscal irresponsibility. Reflect a minute on the millions of US war veterans’ sacrifices as noted: Continental Army brutal winter in Valley Forge (1777-1778); The Western Front of WWI (1914-1918); Normandy Invasion of WWII (June 1944); Battle of Inchon in the Korean War (September 1950); Tet Offensive in Vietnam War (1968); Gulf War/Desert Storm in Iraq (1990-1991); and the Wars in Afghanistan and Iraq (2001-2003). They have taken the ultimate risks to secure freedom for hundreds of millions living in far dark corners of the globe. Moreover, we, as a nation, have invested more resource to defend liberty and rebuild nations than all other nations combined over modern history. However, there is a very un-American dichotomy between this consistent sacrifice over four centuries in the name of freedom and America’s shameful ‘me-first-now’ culture that results in over-spending and borrowing.
Here are some ideas to balance the budget quickly through spend reductions that requires sacrifice by all Americans.
1. Responsible Government Act: a bill and ideally a constitutional amendment (that elected representatives can not change easily) to limit federal spending to 17% of gross domestic product, the average over the last 120 years. This would reduce current federal spending by 4% of GDP and would balance our federal budget. 2013 US Deficit $648 billion (4.1% of GDP). How do we cut $648 billion of federal spending to balance the budget? Here are several solutions:
1a. $70 billion: Return Federal Unemployment Insurance to historical 26 week benefit from today’s 73 week benefit (that’s nearly 1.5 years of ‘severance compensation paid by taxpayers’). CBO Cost of Unemployment Insurance. Further reduce Unemployment Insurance to 12 weeks, but invest that money into 14 weeks (3.5 months) of an authorized vocational training program that leads to realistic employment with US employers. I will purposefully avoid the Food Stamp program which now costs taxpayers $78 billion (100% increase from early 2000s) because the average household income is $8,800 and food stamps boosts monthly income by 39%/household without children and 45%/household with children. Since 2000, the number of individuals below the poverty level has increased by 15 million from 11.3% to 15% of the population and households by 8.3 million (21.2% to 24.7% of households below poverty line). CBO Cost of Food Stamps
1b. $234 billion: US Senator Tom Coburn has prepared a very detailed and balanced prescription to fix Medicare and Medicaid programs that requires doable sacrifices from all stakeholders. I encourage everyone serious about fiscal solvency to read and understand his proposals. Back in Black: Medicare & Medicaid long-term solution, Senator Tom Coburn.
1c. $100 billion/year: ‘Medical Price Sunshine Act’. Of the $2.2 trillion spend (or $1 trillion on Medicare and Medicaid), we spend $2.0 trillion on health care services and supplies. We pay at least 5-10% global higher prices because we have no idea what we’re paying for. Every worker in today’s health care system knows full well there is wide price variation for the same volume of goods and services within a single entity let alone across the country. People must financially accountable and empowered with transparent quality and price data to shop for health care like we shop for anything else. Every health care service provided in the United States and most world health care systems has a standardized billing code and name. We just need to make the information public so private businesses can offer the public easy to use price comparison shopping web sites.
- all health plan premium prices need to be posted on employer’s web site and state insurance web sites. Age/sex experience rating should be allowed, but pricing should be transparent including to competitors.
- all health plans must post ALL provider prices on-line and send a quarterly file to CMS for CMS web site by standard billing codes. Hospital, surgery center, physician, lab, radiology, blood bank, etc.
- all hospitals must post their drug, device, anesthesia prices across all vendors on-line. Government can provide insurance companies and providers a simple Excel spreadsheet organized by payer name across the top and ICD-9 (hospital) and CPT-code (physician) in column A.
1d. Private Medicare and Medicaid management. Require all 90 million US Medicare and Medicaid beneficiaries join private HMOs that guarantee by contract annual cost savings 5%+/year below historical fee for service costs. In this way, HMOs will use new price transparency to establish best unit prices with health care providers and vendors. The savings are included in the above $100 billion number. The current Part D prescription benefit is 100% privately managed and works great for seniors. 25% of Medicare beneficiaries are already in Medicare HMO plans and most Medicaid beneficiaries are in HMO plans. We need to move 100% into private plans.
1e: $160 billion: Social Security reform: Most economists estimate the Social Security Gap is @1% of GDP or $160 billion/year. I would propose a ‘My Golden Years’ Act to allow people to control their own retirement savings and help their loved ones fill the gaps in the current program without any tax increases.
Conventional political wisdom from left-leaning Public Broadcasting Station, PBS Menu of Social Security Fixes, is Social Security deficit can be largely fixed now by making the following changes: 1) index social security to a federal wage index or a ‘chained price index’ instead of the current current price index (@15% of gap), 2) raise tax on social security income to 90% of income versus today’s low 80% (30-40% of gap), 3) means-test social security benefits for the top 20-25% of income earners (5% of gap) though the income level is bad social engineering, and 4) apply the payroll tax to employee benefits compensation (a large 40% of gap). I would only support #4 if these funds were directly invested in a personally-owned and controlled private retirement account at a federally-qualified financial institution that could be administered by government.
1f: $80 billion in defense spending reductions. The 2012 US Department of Defense budget was $645 billion. With the dramatic counter-terrorism gains achieved with the drone and other surveillance programs at the point of evil, the US military can reduce the risk of military confrontation or terrorism coming from nations unfriendly to the US. Drones and electronic surveillance supports rapid response military action that does not require multi-theater heavy load Army, Navy, and Air Force assets. Moreover, we do not need as much ‘heavy machinery’ R&D and new program procurement as the past. We should always invest in our military’s human capital, active, reserve, and retired servicemen and avoid reductions that would negatively affect our ability to attract and retain Americans ready to serve. That said, there must be ways to cut 13% of our national defense spend and/or raise funds from allies who directly benefit from our military force structure specifically in the Middle East and Asia.
The sum total of these cost reductions happens to be @$640 billion just what we need to balance our budget and start debt repayment noted below.
2. Debt Repayment Act: $500 billion tax revenue/year
The nation should reduce our national debt to GDP ratio to 50%, or a $8 trillion debt reduction. A relatively progressive means to accomplish the goal in which most Americans would contribute is to apply a $4.00/gallon gas tax. The government would lock-down these funds and apply to a monthly debt repayment schedule. This Act would only apply if the Responsible Government Act were to pass because we need to fix a spending limit to ensure we have a balanced budget and can reduce aggregate debt outstanding.
Americans consume roughly 134 billion gallons of gas/year (US gas consumption), which at $4/gallon, would generate $536 billion of annual tax revenue. With a 17% of GDP spending amendment and now a balanced annual budget, we could achieve this goal with 16-18 years. We would expect that gas consumption would fall noticeably as the market responds with more fuel efficient cars, more group transportation focus, and/or more tele-commuting options. The funds could only be used for national debt repayment and the tax would automatically sunset at the end of the fiscal year after a sum total of $10 trillion in tax revenue had been collected.
It’s high time all Americans sacrifice something now as our honorable veterans have done for centuries to preserve and strengthen the American Dream. Getting America’s own house in order and continuing our strong veterans’ support is the least we can do to honor our Veterans.