Thoughts on the made up budget crisis

To me balancing the budget and improving the economy go hand in hand.  Within this there are ideals and facts and unfortunately the two get confused.  Tax cuts for the rich are a perfect example.  Many people ideologically think that since the rich pay the majority of the tax in this country that their taxes should be reduced.  If that is your belief, fine.  However this gets confused with the line that tax cuts for the rich somehow help the economy when the facts show they clearly don’t.  Even now the rich are sitting on a ton of money.  With the money they currently are sitting on there is nothing that says giving them 2% more will spur anything.  The rich get tabbed as “job creators” when in fact if you look at major companies in the Seattle area it is hard to find one that was started by someone who could qualify as rich.  Businesses are how people get rich.  I have asked people who say “taxing the rich disincentivises people to be successful” to show me an example of a millionaire who could have been a billionaire if he only didn’t have to pay that extra 3 %.  Needless to say I have never got one.  There is more than a money motivation there.

I was not happy with how the stimulus turned out.  Tax cuts should have been eliminated in favor of a venture capital program.  “Have an idea?  Great we will help you get started if others won’t.”  Then the money is going to people at least trying to create jobs.  “Want to start manufacturing widgets.  We can help with that.  BTW there is a factory just abandoned in MI that has a skilled labor force.  Is there any reason you can’t go there?”  When the economy sucks investment money gets locked up and people get scarred.  All ideas need to be on the table because that is the genesis of the job market.  People just don’t create jobs out of thin air.  They create jobs off ideas and then people create ideas off of that person/groups idea.  Look at the businesses that have sprung up around Facebook.  This is where a govt investment program could and would help.  Would some fail yes, but in the end it would be better than a blanket program like tax cuts.  I recently worked at a local retail company that is trying desperately to grow.  Revenues and the business model are strong.  They are currently seeking out loans and other sources of funding.  If there was a govt loan/grant program in place jobs could be created almost immediately because the business model is there.  Capital is currently not. 

People point to the stock market and call it investment.  The stock market does not count as investment money.  After the IPO it is just legalized gambling and as someone who loves to bet on sports I can assure you the similarities are glaring.  If I buy 5MM in GE stock I am not creating any jobs.  In the stimulus, infrastructure should have also been prioritized and put on the fast track.   It is something we need to have and improves the overall productivity of the country.  Investing in innovation would help as well.  The US has the resources to lead the way on innovation yet we are falling behind.  

So now you know where I stand on big govt (I don’t really care big or small as long as it is efficient) I can get into the budget discussions.  I believe in a balanced budget amendment but I don’t like the posturing on taxes with the 2/3 rule.  To me I don’t really care how you balance the budget as long as it is balanced.  If you want to create social programs and raise taxes fine or vice versa.  That is what elections are for.  Debt makes it too easy to buy votes and this happens within both parties.  Based off of how approval of the Iraq War dropped when gas prices started to go up my guess is the American public would not have been as in favor of the war if they would have had to pay for it.  I do think tough economic times would be the only time to run debt.  War would be a special situation because I do think a good way to tell if a war is popular or not is to make people pay for it.  For us to run war debt it would need to be on the scale of WWII.  I would like to see a balanced budget amendment be more of a BBA+, meaning that in non-economic troubles the govt is actually required to run at a 5% surplus or something along those lines, so there is $$ in the coffers when the time comes.  The + could probably be a bill as opposed to an amendment as it would not be a perfect amount and will most likely need to be adjusted. 

As far as how the budget needs to be dealt with now, evidence proves increases in government spending help.  The stimulus did help but it was heavily flawed.  When private investment is scarred govt can lead the way and should but my preference would be to do it from a surplus fund.  I agreed that Bush needed to use the surplus to boost the economy however I highly disagree with how he did it.  Obama is in the same boat.  I disagree with how he did most of it as well.  Again, a better program would have been a bigger package of investment and ramped up infrastructure projects.    Absolutely no tax cuts. 

Instead restructure the tax code and aid small business.  Drop business taxes to zero (yes you read that right.)  Then there are no more excuses.  The taxes should come when profits are taken and be taxed as ordinary income.  No exceptions.  That way business can grow tax free and people are incentivized to keep the $$ in the business community.  The tax bracket for those making over 300k per year and 600k per household should be set at the rates they were under Clinton.  A superwealthy category should be created for those above 3 million at 40%.  (Note:These numbers are open for adjustment.)  Tax rates may have to be raised across the board to make up for the business shortfall but I haven’t done the math.  If they are, the burden should be left on the wealthy.  Taxes should be levied at the top tax rate to any money leaving the country.  Money rolled back into business creation is not taxed until it is claimed as income.  Raise the estate tax to 70% over 1 million to exclude farms and private businesses.  Stock is treated like cash (maybe and exception if it was part of an IPO and held from that IPO.) 

Regulations can be both good and bad and they need to be reviewed.  Many times regulations are put in place due to overreaction.  When I was helping to run the retail business I came to a conclusion which is the following.  There is not enough assistance to small business to make sure they are up to code and within regulations.  This info isn’t exactly easy to find and it should be.  It shouldn’t be a pain in the ass to start a business or you shouldn’t have to worry about losing your business because you weren’t following some regulation you didn’t even know about.

Now it is a matter of where we go from here.   Washington is more into the political points than doing something meaningful and this is on both sides.  If you want to cut the deficit fine, but everything should be in the table and revenue has to be a part of it as well because cuts alone won’t do the job.  If we implement spending cuts and another recession hits then I hope the blame is laid where it should be.  I would prefer a stim package like above to get everything back up to snuff and then enact this.   If you think we can’t afford this now you can look back through history and see that we very well can.  Making massive cuts in a robust economy won’t do any damage.  Doing it now, will.   So far the spending cuts have been tempered and pushed out enough where we should be ok.  Spending cuts is really where ideals and priorities come in, and is much more personal than factual but many times a blend of both.  I would dance in the streets if a bill was ever passed that cut defense spending by 2/3.  We already spend 10 times as much as any other country.  I am sure there are some that would like to increase defense spending and we can debate about how wrong you are but I am probably not going to convince you.  I do believe SS and Medicare should be on the table.  Medicare can and must be improved and the SS retirement age should be raised.   For smaller spending I think the govt should do what it can to spur innovation at all times.  There is a lot of money to be saved by pulling back foreign aid.  I have never understood borrowing from China to give to Israel.  Israel can borrow from China.  If we are at surplus levels then foreign aid is great but not while we are in debt.  Overall I think spending should remain the same and be retargeted, and if we want to do something to ease the debt then raise taxes where the money is economically stagnant.  Once the economy picks back up let’s get to a balanced budget like happened in the 90s and should have happened in the 2000s.