Saturday, March 12, 2011

Solutions and Options

Solutions and Options: Part One


Don’t tax you, don’t tax me.  Tax that fellow behind that tree.
Senator Russell B. Long (D-La.)

I really didn’t want to do this and I have been avoiding it for some time.  I just did not want to have to think or study this hard.  I think that is where a lot of us are.  We grasp at the simplistic answers just so we don’t have to concern ourselves with the implications. The fact of the matter is simple.  If I can see things or come up with an idea or two then the people that are smarter than me should be able to also.  I believe they can so that only leaves willful disregard as an excuse.  It is willful disregard due to political pressures or philosophical preferences and that just will not do any longer.  We are all going to have to accept a different way of doing things and, if we do, we may find that it is not too painful.

Readers of this column will recall that recently I called out those people who are trying to tell us that this country is broke and can’t afford to do things for the people.  I called it poppycock and it is the worst kind of poppycock.  It is the kind that selfishly desires to amass advantage and fortune at the cost of the average citizen.

Before we start it needs to be said that we are not going to get to a balanced budget or decreasing the national debt by eliminating any or all of the discretionary budget.  We could eliminate all of it and still not trim the deficit or debt.  There is just not enough money there.  There are only a few places where there is enough money spent to be able to achieve any significant amount.  They are social programs, military and tax expenditures.

In this column I want to take on tax expenditures.  Up until just a few months ago I didn’t even know what tax expenditures were. These are things that are built into the tax code as exemptions to benefit specific special interests.  I am not going to try to argue the value of those exemptions but only to point out where revenues and expenditures can be altered to balance our budgets and fund our social framework.

Tax expenditures make up something just short of a trillion dollars a year in lost revenue to the federal government.  Now, each one of these exemptions has its own constituency that will argue that its value outweighs its cost and they may be right.  But that is not what we are dealing with here.  We are looking for ways to fund government.  A couple of the most beloved tax expenditures are the home mortgage interest deduction and the charitable contributions exclusion.  The largest is the deduction that businesses can take for contributions to employee health care.  You probably thought they did that out of the goodness of their hearts.

None of this is news.  The tax expenditures were taken on by the Simpson-Bowles Commission and pointed out as favoring the more wealthy in our society and being available for significantly increasing revenues without raising taxes.  Of course, a lot of people will call eliminating an exemption the same thing as raising taxes and that just can’t be avoided.  Everyone is going to give his or her pound of flesh.  I have a list of citations for reference for any of you that would care to see them.  They can provide a good visual experience for evaluating tax policy.

Much to everyone’s dismay the solution for our financial mess is going to be combinations of measures that are sure to offend everyone.  We did not get into this situation by overspending a million here and a million there.  We created this hole by extending tax cuts that did result in a larger economy but unbalanced revenues.  By engaging in wars without putting them on the books.  By creating Medicare D (which I love) without specifying a way to pay for it. Then another tax cut that did the same thing as the other one.  Each one of these gaffes hit the bank for hundreds of billions of dollars.  The solutions to getting out of the hole will have to be significant as well.

Tax expenditures have to be considered.  Social programs have to be on the block.  For them we will probably have to raise the retirement age and the maximum amount that can be tapped for FICA.  Last but not least, the military that President Eisenhower warned us about those 50 years ago.

I have a list of some of the tax expenditures if anyone would like to have them.  These ideas are not my own but amalgams of what others have said.  There is going to be something for everyone to hate so don’t feel left out.  We don’t have to like it but we do have to take the medicine.

Next week we will look at military spending and some places we might be able to knock a few hundred billion off the bill.

That’s my take on the beginning of a long conversation about debt and deficit reduction.  My goal will be to cause us to think about the implications and decide what we are willing to do without.

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