The American Spectator : How to Balance the Budget

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How to Balance the Budget

By Peter Ferrara from the July 2010 - August 2010 issue

It can't be done by constantly chasing lower than expected revenues.

(Page 2 of 2)

In 1993, President Clinton tried again, with a Democratic Congress voting through a tax increase as part of another budget deal. By 1995, the new Republican Congress, elected to replace the tax-increasing Democratic Congress, was greeted with a Clinton budget projecting continued $200 billion deficits indefinitely.

House Speaker Newt Gingrich led Congress to try a different approach, the one tried-and-true way to balance the budget, which has worked every time it has been tried. It is a simple two-step process. One, cut tax rates to improve incentives for savings, investment, job creation, business creation, business expansion, entrepreneurship, and economic growth, to get the economy booming. You can't balance the budget by constantly chasing lower than expected revenues. With the economy booming, revenue surges consistently. Step two, cut spending growth, and let revenues surge past it.

The new Republican Congress cut the capital gains tax rate by 40 percent and reduced other tax burdens on capital investment. It also cut total federal discretionary spending, including non-defense discretionary spending, with both actually declining from 1995 to 1996 in nominal dollars. In constant dollars, the decline was 5.4 percent. By 2000, total federal discretionary spending was still about the same as in 1995 in constant dollars. As a percentage of GDP, federal discretionary spending was slashed by 17.5 percent in just four years, from 1995 to 1999. Total federal spending relative to GDP declined from 1995 to 2000 by 12.5 percent, reducing federal spending relative to the economy by one-eighth in five years. The House-passed budget in 1995 actually cut federal spending by a trillion dollars over 10 years, when a trillion dollars was still real money.

As a result, $200 billion annual federal deficits, which had prevailed for more than 15 years, were transformed into surpluses by 1998, peaking at $236 billion by 2000.

This is the approach we should adopt now to balance the federal budget again. We should start with tax reform that will maximize long-term economic growth. The current federal corporate tax rate is 35 percent, approaching 40 percent counting state corporate income taxes. This is the second-highest corporate tax rate in the industrialized world, which leaves American companies uncompetitive in the global marketplace. The EU has slashed its corporate tax rate over the last decade from an average of 38 percent to 24 percent. Germany and Canada are slated to go below 20 percent. Our emerging competitors India, China, and Brazil have lower business taxes as well.

We should cut the federal corporate tax rate from 35 percent to 15 percent to restore international competitiveness for American companies, and adopt an optional flat tax for individuals of 15 percent as well. To offset those cuts, we could close both individual and corporate loopholes, including credits, special deductions, and exemptions. We should follow the Steve Forbes/Dick Armey flat tax model of providing a generous personal exemption of $10,000 per person, exempting the first $40,000 in income for a family of four, so the tax burden would not increase on low -- and moderate -- income workers.
We should keep the capital gains and dividends tax rates also at 15 percent, and abolish completely the counterproductive and unfair estate tax and Alternative Minimum Tax, as multiple taxation of capital is never a good idea.

These measures would establish the revenue base we have to work with, and the government could simply match long-term spending to it. We can save a trillion dollars just by terminating unspent stimulus funding, and ending, rather than refunding, TARP bailouts. For everything else, other than Social Security, Medicare, and Medicaid, we should return to the spending levels of 2007. That was just three years ago, and America was doing fine then. Apply that to national defense as well; 2007 was the height of the Iraq surge, an adequate funding base going forward. This would have the added benefit of demonstrating to everyone the real source of current budget deficits. The budget documents show that this would save an additional $670 billion in annual spending to start, growing over time as the long-term baseline would be lower.

For entitlements, what we need is fundamental structural reforms, not trying to just "cut our way out of this problem." We can start by allowing young workers the freedom to choose to save a portion of their Social Security payroll taxes in their own personal accounts, with the accounts taking responsibility for an equivalent proportion of future Social Security benefits. Because long-run market investment returns are so much higher than what Social Security even promises, let alone what it can pay, workers would actually get higher rather than lower benefits through this option. Consequently, we can back up the accounts with a federal safety net guarantee that workers with the accounts would get at least as much as promised by Social Security.

We can start small and then expand the accounts over time until they finance all the benefits currently financed by the payroll tax, replacing survivors' benefits with life insurance, disability benefits with disability insurance, and even Medicare with health insurance. The payroll tax can consequently be phased out over time as well. These personal accounts dramatically reduce federal spending over the long run by shifting the payment of all these benefits from the public sector to the private sector. There would consequently be no need to cut these promised benefits. They would be replaced over time with better benefits from the private sector.

The general revenues now financing so much of Medicare could be used to provide means-tested vouchers for health insurance for seniors who could not otherwise afford such coverage, with such general revenue expenditures limited to grow no faster than the rate of economic growth. Medicare Advantage should be updated and expanded so that all seniors would be free to choose private coverage for Medicare, including Health Savings Accounts (HSAs).

We should also expand the enormously successful 1996 welfare reforms to the other 85 federal means-tested welfare programs, sending the federal financing for those programs back to the states in the form of finite block grants that do not vary by matching state spending. This includes Medicaid, food stamps, and housing programs. The states would then redesign their entire welfare systems based on work by the able-bodied, with states that succeeded in reducing costs rewarded by keeping the savings, and states that ran up costs paying for that themselves. The 1996 reforms succeeded in reducing the rolls of the old AFDC program by nearly 60 percent nationwide, portending enormous potential savings from expanding these reforms to the entire welfare system.

Medicaid in particular could be reformed by providing vouchers for the purchase of private insurance for the poor, including HSAs, allowing them to escape the poor health care provided through the Medicaid ghetto, and enjoy the same health care as the middle class.

Bringing back the Freedom to Farm policies of the 1990s would phase out agricultural subsidies entirely. We should extend that to eliminating all other corporate welfare as well, exactly contrary to Obama's crony capitalism.

House Republican budget chief Paul Ryan has already shown how similar reforms, including the tax reforms, would permanently balance the federal budget over the long run, as officially scored by CBO, with federal taxes and spending at their postwar average of 18.6 percent of GDP, in addition to achieving full solvency for Social Security and Medicare. Ryan's plan, which he calls "A Roadmap for America's Future," includes financing the transition to personal accounts entirely through the savings from the entitlement and spending reforms. The full reform plan outlined in this article would reduce federal spending by more even than the Ryan Roadmap.

Tragically, however, President Obama's Washington establishment deficit commission won't consider any of these innovative reforms. It is likely instead to demand more taxes from working people through a Value Added Tax, as in socialist Europe, which House Speaker Nancy Pelosi has already endorsed.

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About the Author

Peter Ferrara is Senior Fellow at the Carleson Center for Public Policy, Director of Entitlement and Budget Policy for the Heartland Institute, and General Counsel of the American Civil Rights Union. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under the first President Bush. He is the author of America’s Ticking Bankruptcy Bomb, now available from HarperCollins.

Letter to the Editor View all comments (41) | Leave a comment

Ken (Old Texican)| 8.16.10 @ 7:18AM

Peter,
Again, thanks.

I just can't see how we can uncouple entitlements from vote-buying, but it seems to me that we absolutely must do so.

What horrible thing/s have to happen in our country for us to do so?

Jack Kinch(1uncle)| 8.17.10 @ 6:22PM

Right. Entitlements are for vote buying. We need a better educated citizenry. One that welfare checks cannot buy.

chuck| 8.16.10 @ 7:29AM

Institute the FairTax, not the flat tax. This would eliminate the IRS and insure not just equal footing for American corporations, but a playing field tilted in our favor.

GtKeeper| 8.16.10 @ 8:53AM

Absolutely agree! We need to implement the Fair Tax; eliminate the IRS and take to power away from politicians and give it back to the people.

jack| 8.16.10 @ 6:22PM

What are you going to do with the 16,000 new IRS agents hired in the health bill? By the way, The fair tax gives the government too much money. They need a spendthrift budget to remove much of their power. This could be forced by the states through an ammendment reinforcing the 9th and 10th ammendments. The feds gave themselves the power, we have to take it back.

chuck| 8.16.10 @ 8:51PM

16,000 new and the 100,000+ older IRS agents can join the already millions unemployed. Just breaks my heart. :o) For those of you that think that's just heartless, well so are IRS agents!
The 16th and the 17th amendments need to be repealed. That would eliminate authorization of the income tax, and abolish the direct election of Senators. The Senate was set up to be the representative of the state government. The states would surely then have the power to rein in the Federal government.

Scribonius Curio| 8.16.10 @ 7:35AM

I believe that Ron Paul is correct in his position that the US will need to stop being world policeman if we are to balance our budget. Perhaps there are justifications for being in Iraq and Afghanistan, but we are spending trillions. Budget deficits are clearly a big threat to the future of our country. Does Afghanistan pose a greater threat?

We need to make hard decisions, and not just about defense, because entitlements also need to be addressed. Social Security could be brought back in line with relatively minor changes, such as moving full retirement to 70 or means testing the cost of living adjustment. Our biggest problem is out of control medical spending. The US spends far more than other countries on health care. This is probably due to rent seeking on the part of entrenched interests, so it will be very difficult to fix.

JP| 8.16.10 @ 10:11AM

Here's a few facts:

1)In 2011 the Medicaid spend will be more than the military budget. Medicaid will surpass $600 billion next year.

2)In 5 years time, Medicaid, Medicare, and Social Security combined will well exceed $2 trillion. And the interest on the debt will come close to exceeding defense spending.

3)Defense spending is the only budget item that is slated to be slashed.

Ron Paul is debating a strawman. If we were to reduce defense spending down to 0, our budget defecits in 2015 will still be in the trillions. Yet, defense is one of the few areas where the federal government is empowered.

There is no way we can "grow" our way out of these defecits. The demographics are just not there. You wish to cut the defecit, you must take a knife to entitlements. And that is one place where niether conservatives nor libertarians wish to go. Everyone loves thier pork.

Bill Hussein O'Stalin| 8.16.10 @ 7:53AM

I was watching the Greta Van Susteren show the other night when the name of Peter Ferrara was bought up by Newt Gingrich.

Newt Gingrich claimed Peter Ferrara would help him solve the deficit.

First, Mr. Ferrara should be applauded for exposing the disengenious theme behind the Debt Commission. They will call for many taxes and spending cuts but the taxes will be passed while the spending cuts will be passed by and ignored.

Some of these ideas proposed by Mr. Ferrara sound good but I don't see how cutting spending growth and letting revenues surge past it would work. Each time there has been a tax cut and growth in revenues the federal government figures out a way to spend that much and more.

In fact, those surpluses you referred to were created by looting the Social Security Trust Funds which allowed the government to claim a surplus while actually spending more then was received.

You have to understand that the government runs two sets of books, the unified budget, which had the surpluses created by looting the Trust Funds, and then budgets concerning Social Security and the Postal Service, both of which are suppsed to be self supporting

When those meager surpluses arose because of a booming economy the government decided to spend it as opposed to paying down the federal debt.

That is the typical mind set in Washington, tax efficiently, but spend like there's no tomorrow, and without any thought to the long term effects.

Another thing you need to understand is that entitlements take about 2/3 of the budget. Many of those entitlements involve major groups who vote and few are willing to give up anything, especially during a recession which may soon turn nasty thanks to business as usual inside the beltway.

What's needed is a further step. And that would be significant cuts in the size of the federal government and the elmination of waste as evidenced by the existence of manyfederal agencies who produce nothing.

The Department of Energy and The Department of Commerce, among many others have never realy served a purpose other then to expand the size of government. Since the Department of Energy was created in the 70's by Jimmy Carter, the Department of Energy has never created one drop of energy. In fact, the agency has wasted much carbon really not doing much of anything.

The federal government is too large with too many high paid employees who produce nothing.

In essence, the U.S. Congress has looted the creation part of society and shifted it to the looters who create nothing but take large salaries for doing little to nothing.

Until that equation is solved no amount taxes or phony cost cutting will solve anything. It will simply kick the can down the road again. The road will never end and there are too many feet in Washington who like to kick cans.

21st Century| 8.16.10 @ 8:18AM

Federal, state & local spending all has to be taken into account or else any reduction of federal spending will just be offset by increased state & local spending.

The whole American lifestyle needs to be over hauled and the old 1950's playbook replaced. Most of the Reagan groupie types have group think and can't see anything outside of their Leave it To Beaver mentality.

Start with the children, maybe year round school and they graduate 2 years earlier, maybe lower the working age to 13 and they have to earn their way into the last 4 years of school or they enter the work force. This isn't the 1930's where kids where sent into coal mines or steal mills.
If they graduate high school at 16 than they could enter the work force or go to a community college for 2 years and than if they qualify off to a University.

We need to discourge the sinlge mother trend, maybe no more section 8 and food stamps and the rest of it, instead if people need government aid dorms and chow lines along with curfews to take away their social life. Currently there is little downside to it and they can have a boyfriend and go out and have a good time, why would they marry some guy and have no entertainmnet budget if they had to use his paycheck to pay the rent and buy food, let the government pay for that stuff.

Old age benefits, lower medicare to 50 years old, means test the monthy premium and make social secuirty means tested for only people over 75.No more government check for everyone just because they hit 62 or 65 or 67.
People over 50 should have paid off a house so could take an easier job because they would have medicare and semi retire and work until they are 75 and than if they need government assistance they can apply based on their income and net worth.

Changing the tax system is needed, maybe a VAT and end most of the tax breaks and a $15,000 standard deduction and maybe $5,000 per dependant.

It's a fantasy we can live close to 90 years and only work 45 of them and at 40 hours a week for half our lives it only averages out to working 20 hours a week from the day we are born to the day we die.

We need to work more hours during our lives, not so some labor racketeers can exploit us, so we the people earn more money during our lifetimes and take care of ourselves.
Everyone has been brainwashed we have to stay in school until we are 18 and we have to retire at 65, why ?

Scribonius Curio| 8.16.10 @ 10:37AM

I like your idea about year round school, but I don't think the unions would go for it. Also, if there are no jobs, then someone who is 13 will have nothing to do. Ending tax breaks makes sense, but adding VAT tax on top of all the other taxes would leave people unable to afford basic necessities.

South Texan| 8.16.10 @ 5:35PM

21st, Are you in your twenties perhaps? I'm 58 and most of the old people I know still work. Social Security won't pay for much. It is a failed social program. All the programs you mention are examples of failed socialism. Tinkering with them here and there will not solve the problem. Tax increases will not solve the problem. Quit spending so much is the only answer. There will be some pain but it is necessary. Let old people decide what they want to do without social security. You don't have any right to say that they should have to keep working. Freedom of choice is always best.

Louis Jenkins| 8.16.10 @ 9:03AM

We should be amazed that the Democrats/Republicans has chased the rabbit with decreasing revenues? The Commander n Chief has a solution-increase the revenues!! Plain and simple. "I'll made the USA howl," says Obama. We're going to howl alright, only it may be in a different fashion than what Obama has envisioned.

Nathan Greenwald| 8.16.10 @ 9:10AM

One comment about Paul Ryan's plan and potential solutions- doesnt his plan contain an 8.5% VAT tax? In that case the distinction between his plan and the goals of people like Pelosi is much narrower than you assert.

South Texan| 8.16.10 @ 5:37PM

Nathan, I agree. Paul Ryan = socialism lite.

RCV| 8.16.10 @ 6:12PM

I just love it. Now Paul Ryan is a "socialist"! You guys at TAS are truly the fringe.

Clinton nee Publius| 8.16.10 @ 9:13AM

Sooner or later we are going to have to face the reality that liberal-progressives will do whatever it takes to allow unlimited fiscal spending to continue no matter what the outcomes are going to be. This means we have to come to the realization that financing the costs of government with taxation is not going to do anything but lead to the ultimate ruin of our economy and government.

We have no choice in this. We either accept the idea that a "benign tyranny" is in our future or we adopt the investment-income method of financing the costs of government so that we in fact have a system of government finance that is just as unlimited in nature and operation as the impulse for fiscal spending.

This is what we must decide and all we must decide.

Bill Hussein O'Stalin| 8.16.10 @ 10:06AM

Your comments are right on the mark. However, the current ruling elite is not a "benign tyranny" but a malignant cancer.

Clinton nee Publius| 8.16.10 @ 12:57PM

Obviously you aren't getting your information from the New York Times or you wouldn't say such a cruel thing. It WILL be a benign dictatorship - it won't be felt by a single liberal as a dictatorship at all...

dcd| 8.16.10 @ 10:30AM

Get rid of the estate tax and treat the money like ordinary income. Why should Paris Hilton get special treatment because she was given money instead of Earning it.

Jeff Lee| 8.16.10 @ 10:42AM

Money in an estate has already been taxed once as ordinary income. Why should it be taxed again when a family member dies?

dcd| 8.16.10 @ 10:48AM

The money my client paid me to fix his roof was taxed when he earned it, is that double taxed? In fact it was taxed at each transfer so it must have be giga-taxed by now.
Why should income not be taxed just because the recipient didn't work for it?

Jeff Lee| 8.16.10 @ 11:24AM

In your example, your client still has something of value after the transaction. If the government came and removed half of his roof, then your point would be well taken.

dcd| 8.16.10 @ 12:21PM

I'm not quite following your reasoning on that one. I think you're saying that because the donee pays the estate tax it is the equivalent of my client paying the income tax. This goes back to my original point of getting rid of special treatment for heiresses and treating all income the same. The person who gets the income, whether they worked for it or sat on the couch, pays the tax.

Jeff Lee| 8.16.10 @ 3:44PM

Almost all families get what you're calling special treatment from wage earners. If the government wants to tax commercial transactions, that's one thing. Once the money has been earned, and the government has taken its cut (which can be as high as 50% in a place like NYC), then it seems like the person who earned the money should be able to keep the rest. Grabbing another 50% when they die seems perverse to me. Is the idea that all money really belongs to the government and that they magnanimously allow us to use it for a brief period? If so, then we are really nothing but slaves of the government.

Oldefarte| 8.16.10 @ 10:37AM

I agree mostly with the general outlines of Peter's argument, but have some serious disagreements as well. Most all of these propositions are based entirely on tax revenue policy, with very little on governmental spending policy. Due to the disasterous state of our present economy, tax rates/revenues should be temporarily left as they are presently, and the entire concentration should be upon reducing/eliminating spending. The current and historical personal dependency upon governmental welfare has simply got to end, and this could be accompolished over time by substantially converting welfare to WORKFARE. Every able bodied person should have to WORK for the government benefits that they receive, and not simply be provided with them free of charge. Federal, state and local governments employ thousands of workers/employees that clean/repair street, maintain parks, perform menial office work,etc; and these employments could/should be partially replaced with welfare recipients who are/would be capable of performing such tasks. Housing projects/developments provided free are filled with criminals, drug dealers, sexual perverts,etc who should be all kicked out/excluded and not allowed to have the benefit of governmental benefits provided at taxpayers' expense. Additionally, farm subsidies, foreign aid, and exorbatent military hardware should be eliminated/seriously reduced. Wasteful expendatures like the space program, the energy and education departments should all be reduced/eliminated. The constant emphasis upon tax policy is/has played into liberal Democrats' political hands [since they avoid discussion of the waste of governmental expendatures upon the aforementioned] and it is now imperative to put these expendature issues on the table, to discuss them and to start implementing same!!!!!

cls| 8.16.10 @ 10:54AM

Spening cuts are at least as important as tax cuts. Politicians aren't going do that because cutting benifits/subsidies means losing their job. Every politician knows his job is to bring home the bacon and that what most voters want is a lot more ham.
If the republicans were serious about cutting spending then the military budget would be on the table like everything else. That, however, would harm their special interests; so the farce of sacrosanct spending goes on.

Petronius| 8.16.10 @ 11:28AM

1 Abolish all entitlement spending except for our soldiers and 1st responders killed, wounded, and injured in line of duty. 2 Income taxes will be 10% off the top, no deductions from the age of 12 on. Cash gifts under $1000 are exempt. We don't need the IRS clawing it's cut of $20 with that birthday card. 3 Make Social Security and Medicare optional. Put the onus of retirement income back on the citizen where it belongs. 4 Enforce the enumerated powers clause of the Constitution to prohibit the Federal Government from spending money outside of it's original limits.
I know none of these things will ever happen. To bring them about would require a population that is mature, responsible, and economically literate.

kernel85| 8.16.10 @ 12:46PM

Wouldn't putting the onus of retirement income "back on the citizen where it belongs" require a higher minimum wage? Where I live, the median wage is $14.37/hr. which means that many receive pay of around $8.00/hr. with no benefits. How is someone in that situation going to amass the minimum of $1 million by the time he's too old to work, which would be in his early 60s if he does physical labor? People sitting in well-padded chairs don't see the whole picture.

Gill O’Teen ✝✡$| 8.16.10 @ 3:03PM

Well, we certainly wouldn’t want them to bother with improving their marketable skills by taking some sort of advanced training program, now would we? Might cut into their American Idle viewing time. But your idea is so good, even though it totally overlooks that businesses don’t pay people, its customers do. Whenever gum’mint mandates a business expense, it is simply passed down the food chain leading to increased costs and a potential loss of income to the employer. But your idea is so well thought through, that I propose we go all out and raise the minimum wage to a cool million. Yep, that should do the trick, don’t you think?

Gill O’Teen ✝✡$
Don’t Tread on Me.
gill.Oteen07041776@gmail.com
“I wish my brother would learn a trade, so I would know what kind of work he's out of.” - Henny Youngman
Only 888 days to go

Petronius| 8.16.10 @ 4:23PM

Negative. Taxation and regulation skew and interfere with the market place. SS/FICA payroll taxes are the biggest job killers employers face. Add to that, environmentalism, social engineering, and above all, product liability suits make the minimum wage law a pitiful tail end Charlie in the predetermined fixed costs to every business before they open the doors and turn on the lights. The only reason old mafia style labor racketeering does not come back is that the old mob is dead and gone and their offspring live off the money they stole in kickbacks from union members as the price of keeping their jobs years ago. The people in the padded chairs are throwing in the towel because they can't make any money given the litany preceding this sentence.
To all those who believe that the economic deck can and should be stacked so that Democrats prosper and Republicans lose through over taxation had better use their one feeble brain cell to face reality. If their employer does not profit the employee will be unemployed soon after. A business is Not a support group. And the government is Not your mommy. IT does Not exist to take care of You. On that note, state employment is circle jerkery as it does not create wealth or add value to anything people consume or use. The days of the inflated paycheck for minimal pursuits of mindless occupations are gone, never to return. The rest of the world has an industrial base that will continue to displace our outdated workforce not only because labor markets are disparate, but because they aren't plagued by social and environmental litigants running their businesses by judicial fiat.
Our economy is contracting because we have been insulated from the true market much too long. And the cries of inability to compete at that level are moot when the truth is, we won't.
A viable enterprise is not a patch of turf. We call it market share. A job is not a property right. A person is employed because the business engaging him or her needs something done. No market demand; no work. This holds true for all our history from agrarian subsistence to the "knowledge economy" of today. Luddism is it's own reward. Time to grow up has passed for too many.

George S| 8.16.10 @ 11:51AM

This is why the federal government is hiring and purposefully making salaries and benefits twice the private sector. The very definition of Big Government is the size of the work force. The revenues needed to maintain staffing and retirement levels alone pretty much insulates government from entertaining the idea of tax cuts.

Also, as the public sector work force grows, the private sector shrinks, thus attracting more people to public service. The need for more revenue increases.

When we reach the point when the public sector becomes the dominant voting bloc (hello New York), then the public sector's best interest is higher taxes and higher spending and that's where the political focus would be (can you find any conservatives in elected office in New York?)

It is easy to see why Obama is hiring. With the federal government growing -- coupled with federal labor laws that make job security a sure thing -- it becomes a job and a half to reduce the federal work force. All ideas on how to reduce the deficit must begin with scaling back spending. That leaves Republicans with not too many choices: Social Security, Medicaid, defense, or federal worker compensation. If there are as many federal employees as retirees, what would you do? What would President Palin do?

Obama has done not only his FDR impression but his Woodrow Wilson too.

Gill O’Teen ✝✡$| 8.16.10 @ 2:46PM

Yesterday, I found a link on Drudge to a story written by From The Hill’s Russell Berman Saturday and called “Dems may use food stamp money to pay for Michelle Obama's nutrition initiative”.

It begins, “Democrats who reluctantly slashed a food stamp program to fund a state aid bill may have to do so again to pay for a top priority of first lady Michelle Obama. The House will soon consider an $8 billion child nutrition bill that’s at the center of the first lady’s “Let’s Move” initiative. Before leaving for the summer recess, the Senate passed a smaller version of the legislation that is paid for by trimming the Supplemental Nutrition Assistance Program, commonly known as food stamps. The proposed cuts would come on top of a 13.6 percent food stamp reduction in the $26 billion Medicaid and education state funding bill that President Obama signed this week. Food stamps have made multiple appearances on the fiscal chopping block because Democrats have few other places to turn to offset the cost of legislation. Party leaders raided the budget to find off-setting tax increases and spending cuts to pay for their top legislative priorities, including the roughly $900 billion healthcare law. Congressional pay-as-you-go rules require lawmakers to offset all non-emergency spending. Democrats have turned to the food stamp program because funding increases enacted in the stimulus package last year were already scheduled to phase out over time. The changes proposed in the state aid and nutrition bills would simply cut off that increase early, in March 2014. Because the cuts would not take effect for more than three years, Democratic leaders have voiced the hope that they will be able to stop them in future legislation.

As those of you who have tortured yourselves reading my commentary are aware, I am a fan of the numbers available from the National Debt Clock web site. I began tracking the number of folks enrolled in the Food Stamp Program last March 17. Then the count was 39,064,939 which represented 12.647% of the population. On last week’s Friday the Thirteenth, there were 41,694,393 food stamp recipients, 13.451%. That is a huge number of folks for the dumb-ocrats to toss under the bus, even more than the alleged number of illegal aliens roving our highways and byways. The key to figuring this out, is to simply pay attention to the effective date of the legislation - 2014, conveniently after the 2012 elections and more than likely on the agenda leading up to those in 4 years. At that time, the party with a jackass icon, will propose an expansion of SNAP preventing any cuts in the program as to follow through would cause undue suffering to the trillions of children otherwise doomed to going to bed hungry. They will be sure to point out what dastardly pachyderms the respoobly-kons are for wanting to starve OUR babies while trotting out little 9 year old Alfie from Altoona, who only weighs 7 pounds, in order to tug upon OUR heartstrings. To the party of power, this is a win-win. They get to plunge US into more and more debt today while gaining a future sound bite.

Gill O’Teen ✝✡$
Don’t Tread on Me.
gill.Oteen07041776@gmail.com
“The Democrats seem to be basically nicer people, but they have demonstrated time and again that they have the management skills of celery.” - Dave Barry
Only 888 days to go

Gill O’Teen ✝✡$| 8.16.10 @ 7:30PM

Over the weekend, the number of folks on food stamps increased by 35,639 to 41,730,032. This is 13.461% of the population. In the meantime the GDP increased $3,135,742,270 while the National Debt increased $12,938,128,020. I’m sorry, but I don’t see how a 3:1 debt to GDP growth rate is sustainable. Interest on this debt was only $460,534,243.00. Yet the Dow only dropped $1.14. Really?

Gill O’Teen ✝✡$
Don’t Tread on Me.
gill.Oteen07041776@gmail.com
“I love to go to Washington, if only to be nearer my money.” - Bob Hope
Only 888 days to go

Gill O’Teen ✝✡$| 8.16.10 @ 7:48PM

Oops! My bad. The over-the-weekend Debt:GDP growth rate is closer to 4:1 than that rather tame 3:1 I mentioned. To be more precise, it was 4.126017672:1. My only excuse is that I’m still heavily under the influence of vicodin. The good news is the doctor said I can get more.

Gill O’Teen ✝✡$
Don’t Tread on Me.
gill.Oteen07041776@gmail.com
“When you’ve got them by their wallets, their hearts and minds will follow.” — Fern Naito
Only 888 days to go

Jim O'Brien| 8.16.10 @ 4:10PM

Instead of playing around with the existing federal income tax system, our representatives in Congress should enact the Fair Tax legislation already proposed. It completely eliminates the federal income tax and the IRS, replacing revenue with a simple national sales tax collected by the States using existing procedures. This would result in unprecedented economic growth. See www.fairtax.org

Second, federal spending should be slashed by $2 trillion.

David| 8.16.10 @ 5:23PM

Is the "Fair Tax" the same as a "Consumption Tax"? I am all for a consumption tax, no income tax. No loopholes. No mortgage interest deduction.

With a consumption tax, everyone would be paying something. We really need to get at those in the underground economy. There are millions of people who work for tips. Granted, they do pay tax on a PORTION of their tips, but it is small enough that they get it ALL back at the end of the years, with many getting the Earned Income Tax Credit also. I live in Houston, and the number of huge strip clubs with the huge numbers of dancers, who pay no income taxes now, would finally have to start paying something by what they buy. Many of these women/girls are making a fortune, tax free.

The same would be true for all of the drug dealers and other who operate in the underground economy.

Jim O'Brien| 8.16.10 @ 6:10PM

The Fair Tax website has a good synopsis and tons of detail. Yes, it is a tax on consumption. What we have now is a tax on production. The sales tax would apply to all new (not used) goods, and all services. So the tax would be paid by citizens, by illegal immigrants, by drug dealers, and tourists visiting here. We would dump about 65,000 pages of IRS regulations into the trash. No taxes withheld from pay, no capital gains tax, no death tax, no tax on dividends, no estate taxes, no complicated retirement account tax issues, no AMT, no tax returns to fill out. No corporate income tax and no personal income tax. No IRS. People get to keep their money and spend it as they see fit. The United States would attract capital from around the world. The economy would boom like never before in our history.

RCV| 8.16.10 @ 6:15PM

Absolutely spot-on. A VAT or consumption tax is so superior to an income tax on so many levels. It will ease everyone's life, will be be paid fairly and equally in proportion to the amount of spending, rather than earning, that a person does; it encourages savings; it doesn't discourage employment. It seems a no-brainer to me.

jack| 8.16.10 @ 6:46PM

A VAT is not the same as a consumption tax. It is much worse because it is hidden and the clowns writing the rules can add to it anytime. The so called Fair Tax was set up as revenue neutral, and the fed govm't spends and controls way too much money now. Solution is declining spendthrift budget to much lower level, commensurate with real constitutional fed limits.