Big Government – Page 2 – The Old Guy Phd

Debt Reduction: Bowles & Simpson Have it Right – Redux!

G’Day!

On April 1, I posted the article, “Bowles & Simpson Have it Right!”, suggesting that the Bowles-Simpson Debt Reduction Commission’s proposal was a good solution to our country’s deficit and debt crises. Subsequent articles have repeatedly referred to this proposal as a reasonable bipartisan way to address our federal fiscal problems, especially long-term debt, (see “Obama Ignores Bowles-Simpson Debt Reduction Commission – AGAIN!”, “Is Obama Really Serious about Debt Reduction?”, “Fiscal and Debt Crises – Tax Reform Essential!”). Approximately eight months after publishing the Commission’s preliminary report and 5 months after formal submission to President Obama, the “Gang of Six” in the Senate finally appears to be considering it. Perhaps there is some intelligent life in Washington after all. I hope so.

To resolve our unsustainable deficit and debt crises, we need significant comprehensive changes to improve revenues through comprehensive tax reform, to reduce discretionary spending including defense, and reduction/reform in entitlement programs for Medicare, Medicaid, and Social Security. All of these reforms: taxation, government spending, and entitlements, are essential to a comprehensive solution for our country’s problems and ALL must be addressed if we are to succeed.

Bowles-Simpson, which is still an appropriate bipartisan starting point, addresses all of these issues and was approved by 61% of the commission members. I hope it now gets the attention it deserves. The “Gang of Six” and Bowles-Simpson have identified nearly $4 Trillion in deficit reductions over ten years with an immediate reduction of $500 Billion. Both plans rely on government spending cuts and tax reform to lower tax rates, broaden the tax base, and increase tax revenues. These are all good initial actions and I would also suggest the addition of the House “Cut, Cap, and Balance Act, which specifically “Caps” government spending relative to GDP and includes a “Balanced Budget Amendment” provision to insure that our government performs its future fiscal requirements in a responsible way. Currently, polls indicate that over two-thirds of the American people want a “Balanced Budget Amendment” and do not want a further increase in our National Debt. Now is an appropriate time to deal with these issues to insure not only our own future but also more importantly, the future of our children.

If Congress and the President had seriously considered Bowles-Simpson earlier in the year, the debt crisis could already be resolved. We must bring responsibility to the country back into our government and significantly reduce its size.

The Old Guy PhD

Note: The original Bowles-Simpson article with “links” is repeated below for those who missed it.

Bowles & Simpson Have it Right!

In my previous posts, “Big Government IS Our Problem” and “Is Our Government Broken”, I laid out the current and projected fiscal and debt problems facing our nation and argued that significant contraction in government spending is immediately essential. Also essential is tax reform. Our taxes MUST be simplified, the tax base broadened, and tax rates reduced (especially business taxes), if we are to be able to compete in a global economy.

The Debt Reduction Commission’s “Co-Chair’s Proposal” released in December 2010 by the Co-Chairs, Democrat Erskine Bowles and Republican Alan Simpson and submitted to the President in February 2011, is an excellent and understandable overview of the recommendations, which, with minor modification, were approved by 11 of the 18 bipartisan members (61% approval) in December 2010. Unfortunately, the final vote fell short of the 14 votes necessary for the “Supermajority” needed to directly submit the recommendations to Congress. While the Co-Chair’s Draft Proposal differs slightly from the final report submitted to the President, it is worth reviewing for its importance, focus, clarity, and brevity. They have done an excellent job and their proposal deserves the immediate attention of the President and Congress. While no one will be fully happy with all of the commission’s proposals, rational behavior combined with cooperation and compromise by our elected government is necessary if we are to remain a solvent and great nation. The time for government to act is NOW!

The bipartisan Debt Reduction Commission worked from April – December 2010 to develop and present overall comprehensive recommendations to solve our country’s short and long term fiscal and debt crises. They have done their work well. The report addresses all the necessary areas required to resolve the issues including setting out ten (10) objectives, “Guiding Principles and Values”, beginning with “#1-We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today”; and “#2-The Problem is REAL – the Solution is Painful – There’s no Easy Way Out – Everything Must Be On the Table – and Washington Must Lead”. The other 8 can be read by clicking the link in paragraph above. After establishing the Guiding Principles, the following comprehensive “Five Part Plan” is recommended:

1.Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.

Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.
Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.
Achieve mandatory savings from farm subsidies, military and civil service retirement.
Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.

Implementation of the comprehensive Five Part Plan is projected to achieve nearly $4 trillion in deficit reduction through 2020, in addition to other specific improvements in debt and budget reductions summarized below:

Achieves nearly $4 trillion in deficit reduction through 2020: 50+ specific ways to cut outdated programs and strengthen competitiveness by making Washington cut and invest, not borrow and spend.
Reduces the deficit to 2.2% of GDP by 2015, exceeding President’s goal of primary balance (about 3% of GDP).
Reduces tax rates, abolishes the AMT, and cuts backdoor spending in the tax code.
Caps revenue at or below 21% of GDP and gets spending down to 22% and eventually to 21%.
Stabilizes debt by 2014 and reduces debt to 60% of GDP by 2024 and 40% by 2037.
Ensures lasting Social Security solvency, prevents projected 22% cuts in 2037, reduces elderly poverty, and distributes burden fairly.

The proposal outlines how to achieve the above results through specific recommended actions to improve revenues through “Comprehensive Tax Reform” alternatives, to reduce spending through “Discretionary Budget Options” including Defense cuts, reductions for entitlement programs through “Mandatory Budget Options” for healthcare and “Reforming Social Security”. All of these reforms: taxation, government spending, entitlements for healthcare and social security, are essential to a comprehensive solution for our country’s problems and all must be addressed if we are to succeed.

The Co-Chair’s Proposal is controversial but responsible, realistic, and deserves the serious consideration of the President and Congress, who are currently engaged in irrelevant political bickering over trivial spending cuts instead of the substantive fiscal and debt problems we face. Congress and the President should get together, agree on or revise as appropriate the “Guiding Principles and Values” above, and start to work for the American people and our country. Political posturing for re-election is NOT a valid course of action.

Currently, neither the Congress nor the President is addressing our fiscal and debt crises with any sense of urgency. The President and the Democrats are not only totally ignoring the problem but are fighting to avoid even minimal reductions from the inflated budget spending of the last 2-3 years. Federal Budget inflation nearly tripled our federal deficit from $0.459 trillion in 2008 to $1.3 trillion in 2010 and is expected to increase again to $1.7 trillion this fiscal year. Obama’s recent budget proposal for 2012 continues spending at $3.7 trillion and the deficit at $1.6 trillion. Additionally, Obama’s new budget projects a further cumulative deficit of $7.2 trillion for the next ten years – bringing our debt to approximately $22 trillion! This is not leadership; it is madness! Only the Republicans are even attempting to address the issue and, to date, their proposals are woefully inadequate. To be fair, the House Republicans through Representative Paul Ryan are promising to present a comprehensive budget in April that does address the looming long-term catastrophe we face. I hope they deliver.

Given the magnitude of our fiscal and debt problems, the current congressional squabbling is an inappropriate distraction from solving the overall crises facing our nation! Without an agreement on debt limits and/or spending cuts by April 8, our government may shut down. As noted in “Is Our Government Broken”, except for national security and some essential services, shutting down might actually be a good thing. Our government is too big, too irresponsible, and too self-centered. Can’t our Congress or Administration do math?

Where is President Obama’s leadership in all of this? Actually, at the time of this writing he’s currently travelling again and making speeches at a Democratic Party Fundraiser – big surprise. As usual, when leadership and responsibility for our country are required, Obama is absent. Last week with a national debt deadline imminent, Congress took a week off rather than stay in session to attempt to resolve the current national debt limit issue. Brilliant! Our elected representatives need to make financial solvency and economic growth a priority and get to work NOW!

We are on unsustainable fiscal and debt crises that, if not corrected quickly, will lead to potential financial and economic disaster for our country. Our government is oppressive and out of control, its growth must be stopped, and its intrusion in our lives and businesses reversed. We MUST maintain the entrepreneurial spirit necessary for economic growth and global competitiveness. We need to bring back the constitutional freedoms and personal liberties that led us to become the greatest nation on earth. Our government should immediately take up the Bowles-Simpson Co-Chairs’ Proposal.

The Old Guy PhD

Government Imposed Uncertainties Hurt Economic Growth!

G’Day!

In nearly every analysis or survey of why business and financial institutions are not currently hiring or investing in America, the primary reason given is “uncertainties”. While dealing with economic uncertainties is a normal part of business decisions, the Obama Administration and Democrats in Congress have created additional administrative and legislative uncertainties that are unnecessary and detrimental to growth. Removal, or at minimum temporary suspension, of these government obstacles to investment, growth, and job creation would allow business and financial institutions to get America moving again.

Summarized below are the current government-sponsored complications that are discouraging job creation, capital investment, and the economic growth that we would expect from business during a normal expansion. I apologize in advance for its length but the issues are important and merit nominal analysis. Please review the information below and ask yourself, “If I were a business manager or a banker, would I risk my own money to expand, startup a new business, or make loans in this restrictive and uncertain regulatory environment?”

Fiscal Deficit & Debt Crisis: These two related issues are by far our greatest overall national risk! Fortunately we have a very comprehensive, rational, and bipartisan solution available, which was initially sponsored by President Obama. It is the Bowles-Simpson Debt Reduction Commission Report, “The Moment of Truth”. Unfortunately, President Obama and Congress have ignored this proposal since its completion. I have extensively discussed and still support this positive and bipartisan solution, (see “Bowles & Simpson Have it Right!” “Obama Ignores Bowles-Simpson Debt Reduction Commission – Again?” and “Is Obama Really Serious about Debt Reduction?”). The commission’s report, which was approved by a majority of 61% of the bipartisan members, has languished in obscurity since it was completed and presented to President Obama early this year. The recommendations from the commission cover all the necessary aspects of an implementable comprehensive solution to the our fiscal and debt crises including significant tax reform, reductions in discretionary and defense spending, and entitlement reforms including Social Security. For reasons that are a mystery to me, neither Congress nor the President appears to be considering this report in their current discussions. The President and the Democrats are not only totally ignoring a rational solution but have been fighting for months to avoid even minimal reductions from the inflated federal budget spending of the last 2-3 years. How can anyone expect financial institutions or business firms to act positively with these uncertainties hanging over them?

Taxes: As repeatedly discussed in previous articles, both corporate and individual income tax reform is essential for economic growth and investment in our country (see “Fiscal & Debt Crises – Tax Reform Essential!”). We need to raise additional federal revenues by lowering tax rates (especially corporate tax rates), eliminating loopholes, subsidies, and unnecessary “tax expenditures”, broadening the tax base to include more taxpayers, and simplifying the tax code. Currently at 35%, corporate tax rates in America are among the highest in the developed world (corporate taxes in China are 25%, Russia 20%, Germany 15%, and Ireland 12.5%) and foreign profits are penalized if returned to the US. This is ridiculous and encourages job creation and investment overseas, not in the US!

Regarding broadening the tax base, over 51% of US families currently pay no income taxes but receive the benefits paid by taxes from the rest of us, especially the much maligned “wealthy” (who already pay 76% of total income tax revenues). The current Obama proposal is to add more taxes on the “Rich” by rescinding the “Bush Tax Cuts” sooner than they are scheduled to expire. Simple math demonstrates that the “Rich” don’t have enough income to pay for the current and projected Obama deficits. This is nothing but political demagoguery and class warfare in preparation for the next election and is neither rational nor a serious solution to our long-term government overspending problems. If we are to solve our deficit and debt crises, broadening the tax base can and must be accomplished.

In “Fiscal & Debt Crises – Tax Reform Essential!” noted above, I have outlined three overall reform alternatives: 1) Retain but simplify our current “Progressive tax system, 2) Adopt a “Flat Tax” (one tax rate for all), and/or 3) Adopt a “Fair Tax” (a consumption or “VAT” tax). I personally prefer implementation of the “Fair Tax” either alone or in conjunction with one of the other two alternatives. However, any one or a rational combination of these alternatives will accomplish the necessary tax reform goals and stimulate economic growth. All have detailed proposals available to our government, which are currently being ignored. The current extension of the “Bush Tax Cuts” expires at the end of 2012. Would you hire new employees or invest in your business, if you didn’t know what your taxes would be in eighteen months?

Obamacare: Virtually all independent analysis indicates that implementation of the 2000+ pages of Obamacare will ADD not reduce healthcare costs and will probably result in a single payer government-controlled healthcare system with restricted options and limited services. Small businesses, the job growth engine of our economy, are particularly at risk. At last count, approximately 1450 organizations, including many unions, have been given Obama Administration waivers against required implementation of Obamacare because of the higher costs it demands. Equally importantly, no one really knows all the implications, costs, or unintended consequences of the legislation because the Obama Administration is still writing the rules. In two separate articles, I suggested market-based solutions to our healthcare issues, “How to Solve Healthcare Part I” and “How to Solve Healthcare Part II”. I lived and worked in England for the better part of ten years and can assure you government-run healthcare is costly (through taxation), inefficient, slow, and limited in providing medical services. Think long and hard before you support such a system in the US. Again, if you were a business manager and were faced with the higher costs, more administration, and uncertainties associated about healthcare rules that are still being written by the administration, would you add to your payroll costs by hiring new employees?

Dodd-Frank Financial Regulation: Like Obamacare, this legislation is lengthy, complicated and potentially expensive for the financial services industry and ultimately consumers. No one really knows all the implications or additional regulations of the legislation because they are still being written by the administration and will create many unintended consequences for consumers and the industry. The Act is perhaps the most significant change in financial regulation since FDR. It represents major changes to all financial regulatory agencies and affects most of the nation’s financial industry. Major new agencies have been created: Financial Stability Oversight Council, the Office of Financial Research, and the Bureau of Consumer Financial Protection. Perhaps the most controversial provision is the creation of the potentially big and expensive “Bureau of Consumer Financial Protection” within the Federal Reserve System (FRS). Very importantly, even though the new Bureau is placed within the FRS, it operates INDEPENDENTLY. The FRS is PROHIBITED from interfering with matters before the Director, directing any employee of the Bureau, modifying the functions and responsibilities of the Bureau or impeding an order of the Bureau. With virtually unlimited power and authority to act independently, without oversight, the agency can do whatever it deems appropriate supposedly to protect consumers! WOW! Have we become a potential police state regarding “consumer protection”! What ever happened to “Caveat Emptor” (let the buyer beware) and personal responsibility? Is the government going to protect us from everything and if so, how? How many new public-sector union employees will this take? What will it cost? Ultimately, businesses and consumers will end up paying for this new unlimited-power bureau with sweeping authority to do “whatever it deems appropriate to protect consumers”. This is a scary development and creates endless uncertainties as the bureau writes its new regulations. More government madness and not good for job creation (except in the government)!

Additionally, the “Durbin Amendment” gives the power to regulate debit card interchange fees (prices) to the FRS. Effectively this eliminates free markets for debit cards and allows price fixing by the FRS, which was acted on by the FRS this week!

This is not a good trend for freedoms or free markets and bodes poorly for the other uncertain regulations to follow. If you were a banker faced with these uncertainties and risks, what would you do?

Energy & Environmental Policy: An intelligent national energy policy is vital to support economic growth and minimize the very real and present dangers of disruptions in our essential imports of foreign supplies. This policy must include and recognize America’s economic necessities, national security concerns, and the time required and costs necessary for conversion from any current source to any new technologies without creating growth constrains. It must include ALL possible sources of domestic energy generation including fossil fuels (oil, natural gas, coal), nuclear, as well as green energy sources (wind, solar, biotech).

Obama has no apparent energy policy other than promoting the green energy sources to ostensibly support his “global warming” environmental agenda. This action is happening at a time when more and more evidence is challenging and refuting not only “global warming” theory but also CO2 as a causative agent, and at a time when energy demands and prices for fossil fuels are increasing with NO serious alternatives in sight for decades! Further, the dependency and risks from imports of fossil fuels to the US are staggering and the economic and national security consequences of a stoppage of these imports would be catastrophic for our nation. Obama’s administration is actively working against virtually every effort to explore and develop domestic sources of fossil fuels. Offshore drilling in the continental shelf and interior of the US is being severely restricted even though thousands (perhaps hundreds of thousands) of good jobs could be created by actively pursuing known domestic reserves. Specifically, exploration and development of fossil fuel sources are being stifled by a lack of permits from the Administration and delays forced on development by environmentalists such as the EPA’s recent stoppage of Shell Oil’s permit to drill and develop a 27 billion barrel reserve in the Arctic Ocean off the coast of Alaska. (see “Obama Administration Attacks American Business Again!”)

The EPA is also trying to circumvent Congress’ refusal to pass “Cap and Trade” legislation by “backdooring” the regulations as new rules issued directly from the agency. Also, the EPA has proposed two new “clean coal” regulations regarding the use of coal in power plants that may result in “hundreds of thousands of coal industry jobs lost” and an estimated increase in the cost of coal produced electrical power by 11-23%. It is further estimated by a trade group that, in addition to the above jobs lost, the new regulations will cost the coal industry approximately $180 billion. For information, coal-fired power plants account for approximately half America’s energy supply.

I am not opposed to environmental protection or pursuit of green energy sources but, like many, am not convinced that global warming is actually occurring, and if so, is caused by humans or CO2. A rational and balanced national energy policy is needed. Restricting our domestic economy growth at a time of increasing global competition and increasing our dependency on foreign imports from a very volatile area of the world for the sake of a still unproven theory does not seem to me to be wise. It only creates more costs and uncertainties for our country and harms job growth, especially in the energy sector.

Pro-Union, Anti-Business Activism: The pro-union anti-business biases of the current administration are well documented and are detrimental to job creation, capital investment, and economic growth in America. Obama’s endless campaign speeches to unions, the stream of union activists to the White House, and repeated class warfare attacks on the “wealthy” are sufficient evidence of these biases.

Perhaps the most flagrant current example is the National Labor Relations Board’s (NLRB) anti-business, anti-free market, and pro-union (not pro-labor) socialist attack on the Boeing Corporation and “Right-to-Work” States (see “Attack on American Business by Obama “packed” NLRB!” and “Obama “packed” NLRB Continues Attack on Boeing & Free Markets!”). Under Obama, the NLRB has become a pro-union activist body and is now deliberately attacking job creation and investment in America by attempting to stop Boeing, America’s #1 exporter, from final implementation of the firm’s new “Dreamliner” factory in Charleston, South Carolina. South Carolina is one of 22 “Right-to-Work” States, which don’t require (or prevent) hiring union workers. To date, Boeing has already invested approximately $1 billion and hired approximately 1000 workers in South Carolina. Boeing directly employs over 160,000 workers, and is indirectly responsible for approximately another 1.2 million jobs. Apparently to the NLRB, the only “good” American jobs are union jobs.

For years during and subsequent to the Bush Presidency, union activists and Democrats in Congress have prevented the passage of Free Trade Agreements with South Korea, Columbia, and Panama, which are favorable to American business, American exports, American consumers, and will create American jobs. The unions have delayed passage because imported goods coming into the country at lower prices will displace some workers. Really! This is the global free market at work, expands economic growth, creates wealth and jobs, and benefits all consumers who are provided with more product choices at cheaper prices. Finally, this week the Senate is holding hearings on these bills and hopefully, after years of delays and economic losses, will be passed and signed by the President. Just another uncertainty caused by government interference in the marketplace that has hurt job growth and consumers.

With these pro-union anti-business biases at the very top of our political leadership and government, is it any wonder that business is hesitant to hire and banks to loan?

Conclusion: Government needs to get out of the way! (see “Big Government IS Our Problem”) The above issues and the uncertainties they have imposed on our economy are indications of where Obama’s and the Democrat’s policies are leading us. Socialism and central planning don’t work – just ask the former Soviet Union or India. Free markets and individual freedoms do work! Obama is increasingly turning our nation into a centrally-controlled socialist welfare state with significant pro-union, anti-business biases and uncertainties that hurt us all. These policies are not the foundation of freedoms upon which our country was created and which made America great. It’s time to return to individual liberties, free markets, sound fiscal and monetary policy, and limited government. It is time to take back our country!

The Old Guy PhD

Yes, We CAN Grow the Economy & Create Jobs

G’Day!

Obama and the Democrats have tried and failed with virtually every centrally controlled socialist alternative to stimulate the economy and create jobs. The only jobs they have really created are in government. The so-called recovery is the weakest in decades and may be about to “double dip”. Big collectivist government solutions have failed miserably (see “Big Government IS Our Problem!”). Obama and the Democrats only answer to this failure has been to blame it all on Bush. They claim that without their $4 trillion dollar taxpayer & debt funded stimulus, nationalization of businesses, increased healthcare regulations and spending, increased financial regulations, and extreme monetary easing by the Federal Reserve, it could be worse. The only thing that worked has been TARP and that was enacted under President Bush! It is time for government to stop regulating, remove the uncertainties facing business, get out of the way, and let the free market and capitalism work. You do not create jobs by taking wealth from those that generate it, siphon off government administration and oversight, and redistribute less of it back into the economy.

Economic growth and job creation is about free markets, minimum regulations, incentives, and opportunities in the private sector. Government doesn’t create jobs; the private sector creates jobs. Government also doesn’t create opportunities but it can discourage or prevent them (think energy policy) and it can and does distort the market through politically motivated subsidies or tax deductions for selected industries. If taxation and regulations are minimized to the level necessary to support the essential role of government as defined in our Constitution, business will take advantage of whatever opportunities are available in the marketplace and the economy will grow. Unfortunately, the Obama administration and the Democrats in Congress do not understand this. They apparently believe that a few “elites” (themselves) in government are smarter than the millions of consumers and business managers throughout the global economy. They have imposed on American business a climate of increasing regulatory restrictions, increasing healthcare costs, high business taxes, and increasing uncertainty as to what they will do next. In this centrally controlled environment, it is no surprise that American businesses are not currently hiring or investing in our country. The regulations and costs just in Obamacare and the Dodd-Frank Financial Regulations Act are particularly harmful and businesses are wisely waiting to see what the government will force on them next.

So what needs to be done to create jobs and get our economy back on track? At least six actions could and should to be taken: 1) Stop/Minimize non-essential regulations, 2) Have a business-friendly government, 3) Reduce tax rates, especially on business, through tax reform, 4) Enact an energy policy that encourages rather than discourages development of domestic sources of traditional energy, 5) Fix the fiscal and debt crises by cutting government spending, revising entitlements, and increasing tax revenues through tax reform, 6) Pass the three pending Free Trade bills and expand them to include other trading partners.

First, a moratorium on new regulations should be declared and all regulations associated with Obamacare and Dodd-Frank (especially the Consumer Protection Agency) halted until after the next election in 2012. The uncertainty overhang from these two bills alone is stifling hiring and investment by business. Ultimately, all regulations, both existing and new, should have a “sunset clause” that requires our government to formally reaffirm their need at pre-set intervals, perhaps every ten years. This would insure that outdated or unnecessary laws do not become permanent.

Second, President Obama needs to realize that his collectivist socialist policies don’t work and become truly business-friendly. It is no secret that the current administration is pro-union, pro-environmentalist, and anti-business as evidenced by numerous actions by himself and the Administration’s Departments and Agencies. The pro-union/anti-Constitution actions by the NLRB against Boeing in South Carolina (see “Attack on American Business by Obama “packed” NLRB!”) and the many actions of environmentalists against any form of energy development (drilling in the Gulf of Mexico, Shell Oil off the coast of Alaska (see “Obama Administration Attacks American Business Again!”) are not conducive to economic growth and job creation. This week the issue of an energy pipeline from Canada to Texas has also come under attack by environmentalists. These and other obviously pro-union and environmentally biased activities against businesses (and some States) should be halted and free markets given an opportunity to function.

Third, tax reform is essential to both economic growth and reduction in the deficit (see “Fiscal & Debt Crises – Tax Reform essential!”). As the referenced article indicates, there are several excellent proposals available and Republican presidential candidate, Tim Pawlenty, just added another this week. All are pro-growth and pro-job creation and all will work by providing incentives for private sector investment IN THIS COUNTRY, not abroad. Naturally, the Democrats, who believe in centralist government solutions and not in free markets, are generally opposed to all of them. Perhaps the easiest, most immediate, and most beneficial tax reform is to reduce (or eliminate) corporate tax rates to a level equal to or less than the major nations with whom we compete and simultaneously eliminate the politically motivated subsidies and deductions that distort the market. Currently US corporate taxes at 35% are highest in the developed world and actually represent double taxation on income, first at corporate level and again at personal level, when distributed as dividends. Additionally, the high US corporate tax rates discourage US based international companies from repatriating foreign profits back into the US because, if returned, they are taxed at the higher US tax rate. Our current tax policy encourages investment abroad and discourages repatriation of profits back into America. This is a job killer, not a job creator. Is our government crazy?

Fourth, enact a domestic energy policy that encourages rather than attacks development of domestic sources for traditional energy. This will create thousands of good jobs in our economy and reduce our dependence on foreign energy supply. For far too long we have allowed the environmentalists to dictate policy and stagnate domestic energy growth. Every rational person knows America will be dependent on fossil fuels for decades. Yes, development of alternative energy forms and technology is important but there is no chance “green energy” is going to be a replacement for traditional energy sources, including nuclear power, any time soon. It is madness to exclude active development of domestic fossil fuel sources and nuclear power from our alternatives just to satisfy a few environmentalists with unproven science and questionable computer projections. If “green energy” was a viable economic solution, we would not need a policy or subsidies to support it. Also, independent of the longer-term cost benefits from domestic production, the extremely high and increasing risk of supply from the foreign sources is a very dangerous national security concern. The Middle East is in turmoil and no one knows how it will turn out. Without domestic alternatives, American could find itself with an energy disaster, which could seriously endanger our economy. We must actively develop domestic energy to create jobs in America, sustain our economy, and reduce our global supply risk.

Fifth, resolve our short and long term deficit and debt crises. We must get government spending and the dual debt and deficit crises under control (see “Bowles & Simpson Have it Right!”, “Obama Ignores Bowles-Simpson Debt Reduction Commission – Again!”, “Is Obama Really Serious about Debt Reduction?”). Our Government is too big, too oppressive, and exercises too much control over the American people and business. The current policies are sucking money from business and taxpayers, adding more public sector union layers of government control, stifling business growth, and reducing America’s ability to grow and prosper. As stated above, in a free market economy with protection for the freedom of individuals and businesses, the private sector creates jobs. Since his election, Obama has expanded the size and scope of government control far beyond the level any freedom-minded citizen would have imagined possible. Simultaneously, Obama has also increased our federal deficit by $4 trillion and increased our national Debt by approximately 40% to $14.3 trillion. Relative to GDP the size of government has increased from approximately 20% of GDP to over 25.5% of GDP, a 5% increase in the size of government relative to our economy in less than three years. Without correction, our deficit next year is expected to be another $1.6 trillion and in ten years our national debt will grow to a staggering $22 trillion! Does anyone think this makes sense? My article last week, “Is Our Government Broken? – Redux!”, provides more information on this critical issue.

Sixth, pass the Free Trade Agreements for South Korea, Columbia, and Panama. These proposals go back to the Bush Administration and should be easy to pass. I believe nearly everyone including the President and many Democrats support them. As usual, politics is holding them up. Free trade works and provides value through additional products and services at lower costs to all American consumers. Only unions are opposed to free trade because, in the short term, it may reduce union jobs in non-competitive industries. Over 200 years ago, Adam Smith established the unchallenged principle that the wealth of a nation was based on the goods and services available to its citizens. Free trade allows this to work for the benefit of all consumers. It’s time for the unions to realize this and support what’s good for the nation over what’s good for the union.

Yes, we CAN solve our problems, if we have the political will to do so. This country was founded and prospered on the principles of individual freedom, free markets, sound fiscal and monetary policy, and limited government. Let’s get back to our foundations and demand that our elected representatives in government get to work.

The Old Guy PhD

Is Our Government Broken? – Redux!

G’Day!

Nothing has really changed since my earlier post “Is Our Government Broken” on March 16. If anything, the situation is now worse and potentially more detrimental to our country’s international reputation and the growth of our economy. Obama and the Democrats appear to be determined to ignore the problem and demagogue any efforts by the Republicans to actually confront and attempt to resolve our fiscal and debt crises. While there will probably be an extension of the debt ceiling this summer, it will more than likely be another temporary fix and will just “kick the can” further down the road. As I have repeatedly said, this is madness and intolerable behavior for Congress and the President.

The good news is we now have three rational proposals available, any one of which would start to solve our problems. The bad news is that neither the President nor Congress is seriously considering any of them. The proposals available are: 1) the bipartisan Bowles-Simpson Debt Reduction Commission report, “The Moment of Truth”; 2) the Paul Ryan 2012 Budget Proposal, “The Path to Prosperity: Restoring the American Dream”; and 3) the recent Heritage Foundation Special Report, “Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity”. The Bowles-Simpson report and The Heritage Foundation Special Report are fully comprehensive proposals dealing with all sectors of our economy, including desperately needed tax reform, entitlement reform, and cuts in discretionary government spending (including defense). The Bowles-Simpson report was approved by 61% of the members of the commission but for unexplainable reasons, has been ignored by the President and Congress. Paul Ryan’s proposal, which was passed by the House but rejected by Democrats in the Senate, is reasonably comprehensive but does not address Social Security and, in my opinion, does not adequately address Defense spending. In addition to the proposals above, the GAO report “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has already identified unnecessary duplication, overlap, or fragmentation existing across our Federal Government totaling BILLIONS of dollars in ANNUAL SAVINGS. This is also a good place to start.

I have referred to each of these reports in several previous posts on this website and, for the sake of brevity, provide appropriate links below:

The first two (2) paragraphs in my initial post on this subject are still relevant:

“Yes, our government is currently broken and it needs to GET TO WORK! The events taking place in our national government and some states do not represent the principles of elected representative government upon which America was founded. We elected our officials to serve the needs of the people, not the desires of their political party, big business, or unions.”

“President Obama, both Democrat and Republican Congressional Representatives and Senators (with minor exceptions) are not currently working for the long-term benefit of America. Nearly all are posturing and working for what they perceive as the good of their political party and personal reelection. Citizens have common sense and know that we have fiscal and debt crises that are too large and unsustainable. We must get our State and Federal Governments in order.”

Our federal government is out of control and has grown to be too large, too self-oriented, and is not performing their duty to be responsible to the American people. To date the Democrats have proposed absolutely no specific plan to elevate our fiscal and debt crises (other than increase tax rates) and have not passed a budget in over 700 days! President Obama is also not exercising leadership in this crisis and, as indicated recently, is “leading from behind”. Our President is already in full campaign mode in preparation for the 2012 election (which can’t come soon enough!) and is engaged in travelling, golfing, and political speeches. Obama’s proposed 2012 budget is an embarrassment given the magnitude of our country’s ongoing financial problems and projects spending next year of another $3.7 trillion and an addition to the deficit of $1.6 trillion. Over the next 10 years the new Obama budget proposal is expected to produce a further cumulative deficit of $7.2 trillion, bringing our overall national debt to approximately $22 trillion. Again, this is madness and irresponsible and does not serve the interests of the American people!

Most of the Americans now realize “Big Government is Our Problem”! Let’s fix it and put our country back on a solid jobs and economic growth foundation! Adopt one or a combination of the above proposals and let’s get to work.

The Old Guy PhD

Fiscal & Debt Crises – Tax Reform Essential!

G’Day!

Like our government, our federal tax system is broken (see “Is Our Government Broken?”). Our tax code is complex, unfair, damaging to our economy, and its thousands of pages of code are completely beyond understanding by all but a few highly specialized lawyers and accountants! On national television recently it was disclosed that 51% of AMERICAN HOUSEHOLDS PAID NO FEDERAL INCOME TAX last year, the so-called “rich” paid 76% of all income taxes, and 31% of households not only paid no income taxes but receive monetary benefits from the government. Less than half of households are paying for the services and benefits for the all the American people. Our federal tax system is broken and must be reformed as part of the solution to our fiscal and debt crisis. The basic goals of this reform should to stimulate our economy, simplify the tax code and its administration, broaden the taxable base so that all except those in real poverty pay federal tax, and is fair to the American people.

For over a century, federal income taxes were unconstitutional because our Founding Fathers believed that Federal Government should be limited. They believed (correctly as it turned out) that a direct tax on incomes would provide revenues that bureaucrats would find increasing ways to spend, triggering the desire for bigger and bigger government and more and more taxes! Our federal government successfully served the American people from the founding of our nation until 1913 without an income tax, fought several major wars, and we survived and prospered. It required the passage of a Constitutional Amendment (Article XVI) in 1913 to initiate the mess we currently have. In 1913 seven (7) tax brackets with rates from 1-7% were introduced. Five short years later under President Wilson, the top tax rate was 77%! President Coolidge reduced the top rate to 25% by 1925, avoided a post-war recession, and America enjoyed nearly a decade of prosperity. In the Great Depression under F.D. Roosevelt (FDR), while the economy stagnated, taxes were increased to a top rate of 81% by 1940 and reached 94% by the end of WW II.

History since 1913 has repeatedly shown that when income TAX RATES ARE REDUCED, the economy is stimulated, economic growth occurs, and FEDERAL REVENUES INCREASE! President Coolidge in the 1920s, President Kennedy in the early 1960s, President Reagan in the 1980s, and President Bush in the 2000s demonstrated this. The deficit problems following the more recent Kennedy, Reagan, and Bush tax cuts resulted from government spending that increased faster the increasing tax revenues. This provides further support to the original concern of our Founding Fathers that increased tax revenues lead to bigger government bureaucracy and control over economic and individual freedoms.

Our current and worsening fiscal and debt crises requires a comprehensive solution including significant reductions in government spending, major entitlement reform, and desperately needed tax reform to accomplish the goals above. Reform alternatives must consider sales (consumption) taxes, personal and business income taxes, social taxes (those designed to regulate behavior such as “sin” taxes and redistribution of income), “tax expenditures” (legal/loophole tax deductions for businesses and individuals), and government subsidies. The Congressional Democrats have no specific tax reform plan and Obama’s only consideration is raising taxes on the so-called “rich”, which is neither rational nor fair, will harm growth of our country, and cannot solve our deficit problem. Simply taxing business and the “rich” and giving revenues to the government to be redistributed is inefficient, wasteful, detrimental to job and economic growth, and encourages more companies and individuals to move offshore or find lawyers to “game” the system. Last year GE, with $14 Billion in worldwide profits, paid NO federal income tax, because of “tax expenditures” and government subsidies. This is crazy! Big businesses with big legal departments and lobbyists in Washington get tax relief and subsidies while the small businesses, which are the job creation engine of our country’s growth and future prosperity, are stuck with the high tax rates and no funding (unless you have friends in government or are part of stimulus plan).

Overly simplified, there are three basic reform alternatives to consider.

1) Retain but simplify our current “Progressive” tax system (the more you make, the higher the tax rate), eliminate or significantly reduce the deductions and government subsidies (thereby broadening the tax base), significantly reduce all the tax rates for both individuals and business, and eliminate the Alternative Minimum Tax (AMT). Our current system with extensive and complicated deductions also represents a “double taxation” on income, first at business level and again at personal level when profits or gains are distributed. It is important to realize that the US business tax rate is currently the highest in the developed world at 35% (China is 25%, Russia is 20%, Germany is 15%, Ireland is 12.5%) and foreign profits repatriated back to the US are penalized by being taxed at the higher US rate. The current system encourages businesses to move offshore where taxes are lower and to retain profits abroad rather than returning them to America for investment or distribution. This is a job killer not a job creator and leads to wealth creation abroad not in the US. Frankly, I believe business “income (profit)” taxes should be abolished or at minimum reduced to levels consistent with those countries with whom we compete. Reform of the current “Progressive” tax system is the basis for alternatives in the Bowles-Simpson Deficit Reduction Commission Report, “The Moment of Truth”, and ignored to date by President Obama and the Democrats (see Bowles-Simpson Have it Right!). Republican Paul Ryan’s House of Representatives’ approved 2012 Budget Plan, “The Path to Prosperity”, is also based on this approach. (My reservations with the Ryan budget are that it does not address Social Security reform and does not adequately address Defense spending.)

2) Adopt a “Flat Tax” (one low tax rate paid by all) combined with the elimination or significant reduction of deductions and government subsidies above and the establishment of a single low tax rate for individuals and business. It is neither “Progressive” nor “Regressive” based on income and does not penalize one class of citizens over another. Steve Forbes, Arthur Laffer, and Stephen Moore, among others, have proposed a “Flat Tax”. A low “Flat Tax” could accomplish all the goals above and reduce costs and increase compliance with the tax code by significantly simplifying both tax filing and administration. The tax reform in The Heritage Foundation comprehensive proposal “Saving the American Dream” is essentially a “Flat Tax” system based on income sources spent on consumption with an initial single low rate of 18.5% and deductions limited to education, charitable donations, and mortgage interest protection plus protection for low-income earners.

3) Adopt the “Fair Tax” (a tax on sales or consumption, not income), which abolishes income taxes on business and individuals and eliminates the need for the Internal Revenue Service (IRS). The US is the only developed country in the world without a broad national sales tax, usually called VAT. Currently a “Fair Tax” proposal in Congress would replace all federal income taxes on individuals and businesses, the Internal Revenue Service (IRS) would be abolished (a huge saving in administration expenses), and income tax withholding from wages would be eliminated. The new “Fair Tax” would be collected at the point of purchase like the current state and local sales tax. A “prebate” (advance monthly tax rebate) would be given to households on purchases up to the poverty level. Initially the tax would be levied at 23%. A “Fair Tax” treats everyone equally, would substantially reduce administration and compliance costs, greatly simplify the tax process, and allow more freedom of choice for consumers in purchasing and saving decisions. Equally important is the fact that a federal sales tax broadens the taxpayer base to include federal tax revenues from all non-citizens (including illegal immigrants) as well as US citizens making purchases within the country. A “Fair Tax” also encourages savings rather than consumption. “Americans for Fair Taxation” and Republican Presidential Candidate Herman Cain support this proposal.

Any of these proposals or a rational combination of them will accomplish the goals for tax reform stated above and stimulate economic and job growth for our country. Fortunately as noted above, there are several specific proposals available to accomplish this and adoption of any of them would be an improvement over the current system. I personally prefer alternative 3), the “Fair Tax”, followed closely by alternative 2), the “Flat Tax”, but neither may be politically viable. The “Fair Tax” in combination with either alternatives 1) or 2) is also a preferred option.

Tax reform is a vital part of any successful comprehensive plan to resolve our fiscal and debt problems. Let’s encourage our government to stop political bickering, get back to work, adopt one of the above, and get job growth and our economy back on track!

The Old Guy PhD

Obama Ignores Bowles-Simpson Debt Reduction Commission – Again!

G’Day!

Spend and Tax! Tax and Spend! Spend, Spend, Spend! This is the clearly defined policy framework outlined in Wednesday’s political speech by President Barack Hussein Obama. As noted in a previous post, “Big Government IS Our Problem!”. Unless we replace Obama and the Senate Democrats in 2012, big government, reduced personal freedoms, and unsustainable economic policies will continue to be with us for the foreseeable future. Why does the President continue to reject the bipartisan comprehensive proposal by the Debt Reduction Commission, (“Bowles & Simpson have It Right!”)? Can’t Obama and the Democrats do math?

In President Obama’s speech presenting his 2^nd new 2012 budget proposal in two months, he again, as usual, failed to exercise leadership by trashing the serious Republican debt-reduction budget plan of Paul Ryan, and by again refusing to incorporate important recommendations from the Debt Reduction Commission’s proposal. The President’s theme was to incorrectly accuse Republicans of taking money from Senior Citizens and Medicare to provide tax cuts for the “wealthy”. Obama knows better and, as President, should be ashamed of his attempt to mislead the American people. The Bowles-Simpson Debt Reduction Commission’s proposal is excellent and the President, the Democrats, and the Republicans should immediately and seriously pursue this comprehensive bipartisan recommendation, which was approved by a majority (61%) of the commission members. Our economic, fiscal, and debt problems cannot be solved by half-hearted and halfway measures. Everything must be on the table, considered, and acted on through an overall, thoughtful, bipartisan solution that benefits the American people not the political ambitions of the politicians.

In this regard, Obama’s speech was disappointing and pure politics, apparently intended to support his announcement to rerun for President in 2012 (hopefully unsuccessfully). The speech essentially ignored the Debt Reduction Commission’s recommendations and lacked real substance or specifics. In response to the Republican’s budget, Obama did propose to reduce the fiscal deficit from his 1^st 2012 budget by promising to raise taxes on the successful job-creators in our economy – not a good idea for growth and innovation if you understand economics. The speech primarily engaged in inaccurate political demagoguery aimed at Republican Paul Ryan’s 2012 budget proposal. VP Joe Biden was so impressed that he dozed off during the President’s delivery! The prospect of either the 1^st or 2^nd Obama 2012 budget proposal is potentially the same: a larger, bankrupt nanny-state in a slow-growth economy with lower than possible living standards, and a devalued currency with entitlements for non-producers supported by the few motivated and successful business managers, investors, and job-creators. Obama’s plan is an arrow aimed at the heart of entrepreneurs, innovators, and commerce.

In 2-3 short years Obama has increased government spending from an annual rate of $2.9 trillion in 2008 to an expected $3.8 trillion in 2011, increased our budget deficits by over $4 trillion and increased our National Debt by approximately 40% to nearly $14.3 trillion (over $1 trillion owed to China). In addition to this massive increase in the size and scope of government (which Obama now wants to “lock in”, not reverse), he has reduced our individual freedoms in healthcare choices (Obamacare), increased government control over our financial and consumer markets (Financial Regulation Bill including the powerful new Consumer Financial Protection Bureau), taken over private companies, halted domestic oil development, and expanded unsustainable fiscal and monetary policies. Obama is eroding virtually all the policies in which I personally believe and which made our country great, (see “Is Obama Our Worst President or Just the Weakest?”). How did we ever allow ourselves to believe his campaign rhetoric and fail to see through his lack of experience, leadership, and knowledge of the workings of an economy and foreign relations?

What is now quite clear is Obama’s personal commitment to increasing an already bloated and inefficient federal government and expanding bureaucratic control over our lives and our economy. He is attempting to change our entrepreneurial spirit of independence and freedom into a socialist state of citizens dependent on government handouts for our very survival. I would not be totally surprised if Obama adopted Herbert Hoover’s campaign slogan, “A chicken in every pot and a car in every garage”, with this addition: “Paid for by the US Government”.

We cannot continue as a great nation if we base economic policies on the failed socialistic principles of taking from those who work hard and succeed and redistributing their earnings to those who don’t. Even Russia learned that Karl Marx was wrong when he said, “From each, according to his ability; to each, according to his need.” History has shown that socialist policies, if pursued to their ultimate end, result in reduced individual incentive, slower economic growth, lower living standards, and domination by state bureaucrats over the lives of people, (see Nobel Prize Winner in Economics, “The Road to Serfdom”, F. A. Hayek). Obama and the Democrats do not appear to have learned this yet. They appear to have the elitist belief that government bureaucrats can make better decisions for the people than people can make for themselves. Capitalism and democracy aren’t perfect but they are far better than a government-controlled command economy and authoritarianism.

The incentives of capitalism combined with free markets, individual freedoms, and limited government are the best ways to achieve economic growth, prosperity, improved living standards, AND to remain competitive in the global economy. Our US Constitution supposedly protects these fundamental principles but they appear to be increasingly in jeopardy through the actions of our current government. Let’s stop this decay, get back to our traditional foundations, and correct the trend as soon as possible.

The Old Guy PhD

Bowles & Simpson Have it Right!

G’Day!

Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.
Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.
Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.
Achieve mandatory savings from farm subsidies, military and civil service retirement.
Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.

Achieves nearly $4 trillion in deficit reduction through 2020: 50+ specific ways to cut outdated programs and strengthen competitiveness by making Washington cut and invest, not borrow and spend.
Reduces the deficit to 2.2% of GDP by 2015, exceeding President’s goal of primary balance (about 3% of GDP).
Reduces tax rates, abolishes the AMT, and cuts backdoor spending in the tax code.
Caps revenue at or below 21% of GDP and gets spending down to 22% and eventually to 21%.
Stabilizes debt by 2014 and reduces debt to 60% of GDP by 2024 and 40% by 2037.
Ensures lasting Social Security solvency, prevents projected 22% cuts in 2037, reduces elderly poverty, and distributes burden fairly.

The Old Guy PhD

Is Our Government Broken?

G’Day!

Yes, our government is currently broken and it needs to GET TO WORK! The events taking place in our national government and some states do not represent the principles of elected representative government upon which America was founded. We elected our officials to serve the needs of the people, not the desires of their political party, big business, or unions.

President Obama, both Democrat and Republican Congressional Representatives and Senators (with minor exceptions) are not currently working for the long-term benefit of America. Nearly all are posturing and working for what they perceive as the good of their political party and personal reelection. Citizens have common sense and know that we have fiscal and debt crises that are too large and unsustainable. We must get our State and Federal Governments in order.

Our overall national debt is currently $14.2 trillion and growing. It is nearly the size of our annual GDP. Disturbingly, over $1 trillion of this debt is held by China, not our most reliable or friendly partner. Our fiscal deficit in 2008 was $0.459 trillion, by 2010 it nearly tripled to $1.3 trillion, and the expected deficit in 2011 is $1.7 trillion. Additionally, we currently have unfunded “entitlement” liabilities for Social Security of $14.8 trillion, Prescription Drugs of $19.6 trillion, & Medicare of $78.1 trillion. This is a total current obligation for future generations of $112.5 trillion, nearly 8 times our total annual output and just over $1.0 MILLION per current taxpayer. This is madness and is crippling our economy and economic growth.

We actually have NO FEDERAL BUDGET for 2011! Obama’s unapproved 2011 “budget” is expected to reach $3.7 trillion this year. This amounts to $10.1 BILLION PER DAY. In the current congressional debate concerning raising the debt ceiling, Democrats have offered “real” cuts for the remainder of the fiscal year of $10 billion (1 day’s spending) and the Republicans are offering approximately $60 billion (only 6 day’s spending). Neither proposal even remotely addresses the magnitude of our problem. If agreement can’t be reached in Congress, the Federal Government may be forced to shut down. Frankly, except for national security and some essential services, this might actually be a good thing. Our government is too big, too irresponsible, and too self-oriented. Can you imagine what the Founding Fathers would think of what is happening in our government today? A temporary shut down might force us to be more responsible and self-reliant, as the founders of our nation and our Constitution intended.

As noted, the magnitude of our nation’s financial problem is enormous, increasing, and untenable! So what is our government doing to correct the crisis? Last year, the Democrats, who controlled the Administration, the Senate, and the House of Representatives, failed to even pass a Federal Budget for fiscal 2011. They were, however, able to compound our future fiscal and debt problems by passing a massive and unpopular healthcare bill and a financial reform bill, both of which further increase the size of government, with more regulations and control over important sectors of our lives. This legislation further erodes our liberties and free-market economy. Do we really want to become a collectivist country with the government dictating our lives?

For his part, President Obama has virtually abdicated all leadership in this crisis by proposing a new budget for next year projecting spending of another $3.7 trillion and an addition to the deficit of $1.6 trillion. Over the next 10 years the new Obama budget proposal is expected to produce a further cumulative deficit of $7.2 trillion, bringing our overall national debt to approximately $22 trillion. President Obama is spending (pun intended) his time travelling, golfing, and giving political speeches; and his proposed budget is an embarrassment given the magnitude of our country’s ongoing financial problems.

In Congress only the Republicans are even attempting to deal with the fiscal and debt problem and so far they are dealing with trivial, not real spending or fiscal reform (although it is promised). The Democrats are essentially ignoring the problem and blocking even the inconsequential cuts proposed by Republicans for the remainder of this year (see above). When real leadership is essential, Obama and Congress have abdicated their responsibility to the nation and chosen posturing and rhetoric over work and accomplishment for the American people.

At the State level a few Governors are trying to deal with similar budget issues, but some Democrats have deserted their State Houses and fled their elected responsibilities (see “State Democrats Shun Democratic Process!”). Unions are sponsoring demonstrations in several states, which are disrupting our democratic processes and interfering with the ability of our democratically elected representatives (when present) to perform their legislative duties. This is a travesty and is not the way our democracy is intended to work.

Yes, our government is currently broken and it’s time to get to work. What should they be doing? First, after quickly resolving the ridiculous political stalemate over the debt limit and budget for the rest of this year, they should NOT make the fiscal situation worse and the government’s out-of-control spending and inefficiencies should be eliminated as soon as possible. The GAO report “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has already identified unnecessary duplication, overlap, or fragmentation existing across our Federal Government totaling BILLIONS of dollars in ANNUAL SAVINGS. This is a good place to start.

Second, they should employ proven strategic management techniques. Any basic management course indicates that solving problems and capturing opportunities requires: setting long-term goals, reviewing historical performance to identify strengths and weaknesses, identifying and prioritizing alternative “comprehensive” solutions, acting on the best “comprehensive” solutions, and measuring and correcting course to improve performance. Our government needs to follow this agenda. The Bowles-Simpson, Co-Chairs Draft Report, “National Commission on Fiscal Responsibility”, is a reasonable draft proposal for identifying and establishing these goals and actions (some painful) to resolve the long-term financial crisis we face as a nation. It addresses all areas of government including its size, spending, and revenues and suggests major reform in income taxation and entitlement programs. This is also a good place to start. To date, neither President Obama nor Congress appears to be seriously considering the information and recommendations in either report.

“Big Government is Our Problem”! Let’s fix it and put our country back on a solid foundation with individual freedom, free markets, sound fiscal and monetary policy, economic growth, and limited government!

The Old Guy PhD

Big Government IS Our Problem!

G’Day!

President Reagan was right! Big government IS our problem. Many of you are justified in your frustration with government for its increasing size, spending, regulation, and control over our lives. Left unchecked (pun intended), our individual freedoms, ability as a nation to innovate, and competitiveness in the global economy will continue to be eroded. If government would get out of the way, business would improve, jobs would be created, and the country would prosper. Reforming both personal and business income taxes is also required and would further stimulate growth and job creation. Taxes will be the subject of future posts on this site.

The magnitude of our nation’s financial problem is enormous and growing! We anticipate a fiscal deficit of $1.6 trillion in 2011 and President Obama’s budget proposal for 2012 projects a further deficit of $1.1 trillion. Over the next 10 years the new Obama budget proposal projects a cumulative deficit of $7.2 trillion. Additionally, we currently have an overall national debt in excess of $14 trillion, nearly the size of our annual GDP, and according to the National Debt Clock, have unfunded “entitlement” liabilities for Social Security of $14.8 trillion, Prescription Drugs of $19.6 trillion, & Medicare of $78.1 trillion. This is a current total obligation for future generations of $112.5 trillion, nearly 8 times our total annual output and just over $1.0 MILLION per current taxpayer. This is madness and is unsustainable for our economy.

President Obama has impressive rhetoric, but his new “centrist” oratory is unconvincing and inconsistent with the actions of his administration. He has a very different view for the future of our government than I. Obama’s actions indicate the socialist belief that BIG government is the answer to most, if not all, issues. He is converting our personal freedoms and free market economy into a European-style collectivist society with strong central governmental control over our lives and appears to believe that central government can make better decisions for individuals than individuals can make for themselves in a free society. This is a dangerous trend toward expanded central planning and is not the constitutional basis for liberty upon which the Founding Fathers established our great nation. Oddly enough, Obama’s action is taking place at a time when the major European nations are moving in the opposite direction toward American ideals. I believe it was Abraham Lincoln who said, “Government should only do for the people what the people cannot do for themselves.” I fully agree.

If the current administration is not stopped, America’s freedoms, spirit of entrepreneurship, & economic strength could be set back for years and probably permanently diminished. Much has already been initiated with the new legislation for healthcare and financial reform. Both of these new acts add too much central governmental control over crucial industries and need to be repealed or modified to conform to the principles of our free market economy. Future posts will also explore these two subjects in more detail.

America is on an unfavorable and unsustainable course, which must be changed or we face extremely serious consequences for our economy and our freedoms. Ronald Reagan was right (additional pun intended) when he said the 9 scariest words are, “I’m from the government and I’m here to help.” It is time for us to take back our country.

Big government IS the problem; freedom is the answer.

The Old Guy PhD