The "crisis" in Washington over the Debt Ceiling would be comical if it was not so serious. Ringling Brothers could not have staged a better performance of a "debt defying act" -- oops, that's "death defying act."
There is no reason not to raise the debt ceiling. It must be done sooner or later. Tying a vote on raising the ceiling to spending cuts is taking our fiscal process hostage. It is being done to leverage a particular solution to a separate problem - an imbalance between tax revenue and spending.
Whether you believe the imbalance is because we spend too much, or because we tax too little, the imbalance is its own problem. It is, however, linked to the debt, because the imbalance is what drives the debt upward. Fixing the debt problem must be accomplished by fixing the imbalance in the annual operating budget of the government. It is the only prudent way. Because the imbalance is so large (roughly $1.4 trillion), the gap can't be closed only by spending cuts or revenue increases, it requires both. The gap must be bridged by building from both sides, not just one.
Defaulting on the debt is highly unlikely. The consequences are not exactly known, but are surely exceptionally unpleasant at the least. Given that fact, the government would choose to channel available funds first to debt service. Cuts would come from other programs. And they would be drastic. So the more likely fear is not for debt default, but for service shutdowns. It will not be bondholders, but service recipients, a.k.a. taxpayers, who will be affected the most.
Ron Paul suggested in a piece carried on Bloomberg, that default now would be better than default later and there was no other answer. The equivalent on a personal level would be something like saying that everyone with a mortgage and an unbalanced monthly budget would have to declare bankruptcy to fix their problems. Simply not so. This either/or thinking is fallacious. Mr. Paul is part of the problem, not the solution.
Whatever you think of Pres. Obama and his speech on July 25, he got a lot of it right. This is not a problem with a one sided solution - cut spending. Unfortunately, when a Democrat suggests a tax increase you get the Republican reaction (shared by non Republicans as well), that it is just another pick from the pocket of the taxpayer, (albeit wealthier ones) aimed at avoiding hard cuts and political disfavor. As it turns out, President Bush (W) gave taxpayers a gift he couldn't pay for in the form of tax cuts and President Obama gave one he couldn't afford in the form of a stimulus package. Mr. Obama is now in the unenviable position of having to take the gifts back in the form of spending cuts and tax increases. It's probably not the "change" he anticipated when he ran for office.
To filter the rhetoric coming from Washington, we need to remove the term "government" and substitute the word "taxpayers" when talking about money. The government is only an intermediary in taking money from taxpayers and dispersing it to others to acquire goods and services for the benefit of taxpayers. The government, per se, has no money. IT gives nothing to anyone. It merely takes from some and redistributes to others. This is not to disparage government, only to recognize that any discussion of spending cuts and revenue increases ultimately rests on the taxpayers. Nothing about the government is "free."
Today the cost of running the government is about 40% greater than the incoming revenue. That "excess" is the annual deficit and is financed by borrowing. To bring things in line requires a combination of: a) cutting services we can do without and b) raising the funds to pay for those we deem essential. Continued borrowing is like buying groceries on credit with no intention or means of paying it off. That's truly a "moral default." Unfortunately, it is politically expedient for those seeking reelection and it has been going on for a long time.
It is worsened by the fact that roughly half the working population pays no federal income tax, yet enjoys nearly the same or greater benefits than the paying population does. This lopsided financial distribution in a democracy means the "getters" can force the "givers" to put even more into the system simply by applying majority voting power.
There has already been at least one bipartisan committee (Simpson-Bowles) who looked at this situation and made recommendations. They may not be perfect, but they probably represent a reasoned compromise. Certainly, they have to be better than what is coming from our politicians lately. That's one solution.
Interested in another solution? It's not pretty, but it is simple. Adjust spending and revenue by 7% each year (roughly $170 billion). The first year, cut government spending from current levels by 7% and leave revenue alone (no tax increases because the economy is still fragile). In the second year, cut spending 6% and increase tax revenue by 1%, then 5% and 2% in year 3, etc. Continue to change the mix until the annual budget is balanced in approximately 7 years. Then, go one or two more years further to create a surplus to use to reduce the debt. This approach forces changes immediately and avoids the Congressional ploy of claiming "cuts over 10 years" where all the savings supposedly happen at the end and nothing changes now. This approach also does not mean every part of the government goes down by the same percentage. In any given year, the defense budget could go down twice as much as say the education budget.
Would this be painful? Absolutely. It would likely mean the loss of employment for people on the government payroll and those providing services to the government from private industry. It would also mean limits to the growth of social benefits or possibly some reductions. This economy is a bad time to do this, but it is what we face sooner or later - and later only means the debt has grown even more.
The first place to start? Congress. Their budget is $5 billion a year. Not much compared to the trillions of deficits, but a little taste of this medicine would be good for our friends in DC.
Tuesday, July 26, 2011
Tuesday, April 19, 2011
How Congress Can Show Fiscal Leadership
I listened and watched the latest haggling in Congress over the "budget." It was more than dismaying to watch 435 people quibble over a fraction of 1% of federal spending like it was the end of the world. Even worse was the attempt to mix in social policy (Planned Parenthood) with fiscal necessity (an operating budget).
In the last three years, the federal government has spent about 40% more than it has taken in. With the debt at over $14 trillion dollars and equal to the Gross Domestic Product (the value of everything our nation produces in a year), and an annual deficit that creates an additional $1.3 +/- trillion of debt this year, the time for real action is upon us. The president wants to cut $4 trillion over about 10 years, Congressman Ryan wants to cut about $6 trillion in that time. Sounds good? Not hardly. These people are trimming a projected "deficit," not the debt. They are not even getting the budget to balance for years and years. Meanwhile, the debt will continue to expand. What looks like action is only a bandaid over an infection. The recent downgrade by S&P of its expectation for the government dealing with its debt sends a clear signal that the financial markets are getting tired of rhetoric without real action.
Congress is addicted to spending. While the economy cannot handle cold-turkey withdrawal at the moment, Congress needs to become a "Big Loser" and not a casual dieter. Here is one way it could get serious about being fiscally responsible.
Congress and the White House should set an example of fiscal discipline. It will not cripple our economy for Congress and the White to each cut their spending by 10% each year for the next four years. That simply brings these parts of government into fiscal balance. It's time to "man up" and "spend down" in Washington.
With Congress and the President in the lead, the rest of the total budget can be trimmed 5% per year during these next six years to achieve 30% spending cuts while we grow tax revenues by 2% each year for six years to eliminate the deficit and create a surplus to begin modestly retiring the debt. Will this be hard? Absolutely. But failing to act strongly now only makes acting later even more drastic. Don't like 5% and 2%, then try 4% and 3%. This problem needs worked from both directions.
The four largest items in the federal budget are Social Security, Medicare, Defense, and Treasury. Nothing else is even close. With baby boomers banging on the door of the first two programs and an increasingly overweight and obese younger population, who will become sick earlier, SS and Medicare are headed off a cliff. Toss in the government IOU's sitting in the SS Trust Fund and the situation is sad beyond belief. It's time we admit we made promises that changing demographics mean we cannot keep. We must shift from "spending" on services to "investing" in education, infrastructure, and research to rebuild the backbone of our nation and protect our future. Getting less than you thought you would from SS and Medicare is better than getting nothing at all which will happen if the government lets this escalate.
Everyone is nibbling at the margins. That is woefully inadequate given the size of the problem. Send this message to your senators and representatives. Tell them to lead, not squabble.
In the last three years, the federal government has spent about 40% more than it has taken in. With the debt at over $14 trillion dollars and equal to the Gross Domestic Product (the value of everything our nation produces in a year), and an annual deficit that creates an additional $1.3 +/- trillion of debt this year, the time for real action is upon us. The president wants to cut $4 trillion over about 10 years, Congressman Ryan wants to cut about $6 trillion in that time. Sounds good? Not hardly. These people are trimming a projected "deficit," not the debt. They are not even getting the budget to balance for years and years. Meanwhile, the debt will continue to expand. What looks like action is only a bandaid over an infection. The recent downgrade by S&P of its expectation for the government dealing with its debt sends a clear signal that the financial markets are getting tired of rhetoric without real action.
Congress is addicted to spending. While the economy cannot handle cold-turkey withdrawal at the moment, Congress needs to become a "Big Loser" and not a casual dieter. Here is one way it could get serious about being fiscally responsible.
Congress and the White House should set an example of fiscal discipline. It will not cripple our economy for Congress and the White to each cut their spending by 10% each year for the next four years. That simply brings these parts of government into fiscal balance. It's time to "man up" and "spend down" in Washington.
With Congress and the President in the lead, the rest of the total budget can be trimmed 5% per year during these next six years to achieve 30% spending cuts while we grow tax revenues by 2% each year for six years to eliminate the deficit and create a surplus to begin modestly retiring the debt. Will this be hard? Absolutely. But failing to act strongly now only makes acting later even more drastic. Don't like 5% and 2%, then try 4% and 3%. This problem needs worked from both directions.
The four largest items in the federal budget are Social Security, Medicare, Defense, and Treasury. Nothing else is even close. With baby boomers banging on the door of the first two programs and an increasingly overweight and obese younger population, who will become sick earlier, SS and Medicare are headed off a cliff. Toss in the government IOU's sitting in the SS Trust Fund and the situation is sad beyond belief. It's time we admit we made promises that changing demographics mean we cannot keep. We must shift from "spending" on services to "investing" in education, infrastructure, and research to rebuild the backbone of our nation and protect our future. Getting less than you thought you would from SS and Medicare is better than getting nothing at all which will happen if the government lets this escalate.
Everyone is nibbling at the margins. That is woefully inadequate given the size of the problem. Send this message to your senators and representatives. Tell them to lead, not squabble.
Wednesday, January 26, 2011
State of the Union 2011 - Citizen's Edition
The State of the Union 2011 - Citizen's Edition
If I were the president, this would be my state of the union address. This was prepared prior to the president’s speech on Jan. 25, 2011 with some slight revisions and additions afterward. Similarities between this piece and President Obama’s remarks are entirely coincidental.
Greetings, fellow Americans. Let me begin this address by asking our Congressional representatives to “cross the aisle” and join with the other representatives of their state and sit together through these remarks. We are not a nation of Democrats or Republicans. We are a nation of United States and that is our strength. For too long this aisle has stood as symbol of a nation divided by politics and not united by values. If our joining together here and now is good, so it should be for every state of the union address and for every day this chamber is in session. From this day forward, let this body work as one for the success of our country. So, Mr. Speaker, I ask you, “Close down this aisle.”
Let me address the state of our nation. It is mixed. If you are in a corporate boardroom, it is improving significantly. If you are in an unemployment line in Memphis, it is not. If you are drawing a large bonus on Wall Street, it is good. If your home has been foreclosed in Las Vegas, it is bad. In short, we have a nation where some of us are doing very well and many of us are not. The problem is not with the success of some, it is with the failure of many to achieve that same success. We will not make our nation wealthier by taxing the rich and subsidizing the poor. We will only have prosperity by preparing our workforce to generate and share a larger economic pie.
The persons in our workforce who got the message about staying in school, learning, and applying their talents are generally succeeding in America. Our formula for success still works. It is no guarantee, but it is a proven path for many. On the other hand, it seems like we have a growing part of our population that believes school is not worth the effort, that working hard for an employer is too inconvenient, and that good jobs with good pay should be given to them anyway. To this group I say, “Wake up!” That doesn’t work. You cannot skip school, do dope, get pregnant in high school, or choose your spouse foolishly and expect to succeed. In America, you earn your prosperity, it is not given to you by someone else. Get serious. Don’t just attend school, learn to read, write, and do math well! Don’t just collect a paycheck, make an effort to improve your employer’s business! If you have the skills of a third world worker, in today’s global economy you will be earning third world pay. As a nation we cannot afford this. It translates into nearly half our households paying no federal income tax. As a government, we will try to make education accessible and affordable and job opportunities available. It is up to you to do your part to keep this nation strong and prosperous. To those who have skills and are trying hard, but are finding success out of reach in today’s economy, I say, “Keep trying.” We cannot fix the economy over night, but we are working on it and things will get better.
Now, let me address our national priorities. Our priorities are a safe, prosperous and free United States of America. We have sought to achieve that safety by attacking those who have attacked us. We have done it on their turf in Afghanistan. The previous administration judged that Iraq possessed that same potential to endanger us. It did not. We are now disengaging from the war in Iraq. We have stepped up our engagement in Afghanistan with the hope that it will bring us to a faster conclusion there. Our goal is to be disengaged there by 2014. We will meet that goal and accelerate our withdrawal at a rate that prudently protects our forces. We will not remain in either Iraq or Afghanistan in order to prop up their governments. Both countries will have had ample time to put their own houses in order. As an outsider, the United States cannot bring long-term security and stability to these nations. Only when the citizens of those countries act in their own best interests and police the radical elements that bring them grief, will their lives be better. We cannot do for other nations what they will not do for themselves. It is time they stepped up so that our armed forces can stand down and come home.
In addition to drawing down our active military in those two countries, we will also significantly reduce our overseas military presence in peaceful, allied countries. We no longer need and cannot afford to serve as the world’s protector. We must protect our shores first. This is not isolationism, it is pragmatism. The reduction in our military will aid in our overall deficit reduction efforts.
To further strengthen and protect our nation, a portion of the military savings will be used toward increased domestic security. We are not engaged in a “war on terror” that can be fought on a conventional battlefield. We are engaged in a worldwide police action to find, root out, and prosecute those who would harm us where we live. That is a job for our local police and FBI. We will see to it that they are better equipped to do this at home and to do it in conjunction with their overseas counterparts. Furthermore, we will improve the protection of our borders and our ports of entry. By reducing spending abroad, we can improve our defenses at home.
Reducing our military is only one small step in setting our national financial house in order. For far too long your government has not been a prudent steward of its financial resources and has not met its fiscal responsibilities. Your Congress has failed on numerous occasions to accomplish the basic task of approving a budget in a timely fashion to ensure uninterrupted operation of your government. This would never be acceptable in the world of business and it is not acceptable for our nation.
The executive branch has curried favor with the electorate by giving the nation tax cuts that created deficits. We have been borrowing from our future to pay for benefits in the present. In this past year, your government borrowed $0.41 cents of every dollar it spent. You cannot do that and keep your household solvent. Neither can we. This must stop and it will stop. The deficit reduction commission recently made sound recommendations for across-the-board changes in how we raise and spend money. Many people are unhappy with those recommendations. That probably means the commission got it right. We will aggressively pursue implementing those recommendations starting this year. We will not continue to postpone actions to fix problems we know need fixing now.
To drive home the urgency of our need to control spending, balance our budget, and bring down our debt, I will take the following two actions.
First, the operating costs of the Executive function of government will be reduced from their current levels by 20% each year for the next two years. No longer will the White House spend 40 cents we do not have.
Second, by executive order, I will direct all branches of government to reduce spending from current levels by 10% each year for the next four years. This will undoubtedly be a struggle and as a result you may see less service from your federal government. The simple truth is, that through the use of debt, you were getting service that your children and grandchildren will be paying for. They cannot afford it and we will not enrich our time by impoverishing theirs.
We cannot improve our nation without improving the way we govern it. Our constitution is an anchor for our values, but not our methods. We must find ways of managing our nation that are for the 21st century, not the 18th. To that end I will submit the following two constitutional amendments and three bills:
A constitutional amendment reducing the number of representatives in the House of Representatives from its current 435 members to 220 members. The simplest way to have less government is to have “less government.” I challenge Congress to reduce its operating budget by 40% over the next four years in anticipation of this amendment being ratified.
A constitutional amendment limiting the total terms of office for both house and senate members to 18 years or until the end of a full term if the 18 years was reached during a term. Serving in elected office is not a career, it is a service.
A bill called the “One Law Act” requiring that legislation contain only provisions directly related to the primary purpose of that legislation. No longer would individuals in Congress be able to attach pet projects or questionable legislation to ride on the coattails of necessary legislation. We cannot run this nation by using legislative gimmicks to get what we want as individuals.
A bill called the “Right Pay Act” regulating the salaries of elected federal officials, including myself so that salaries are based upon the economic status of the population at large. I do not believe it is appropriate that a Congressperson earns more than $170,000 per year when half his or her constituents are earning roughly one fourth or less of that. I recognize that living in a home state and maintaining a second residence in Washington is a burden a Congressperson faces that normal citizens do not face. If we set Congressional wages at 2.0 times the median family income, then we are closer to reality. We are not trying to set a competitive salary for hiring politicians. We are setting a salary to reflect the prosperity of America. As the country prospers, so will Congress. As for my salary, it will be the same as Congress. To govern with appreciation for our people, requires us to live like the nation lives.
A bill limiting campaign contributions to $100 per person or entity such as a corporation or union. This will be adjusted for inflation with each election cycle. If it this does not pass muster with our Supreme Court because it conflicts with free speech, then we will find something similar that does. Free speech and free money for campaigns are clearly not the same thing. We need the best government we can elect, not the best government special interests can buy.
We will reform healthcare a second time. It is evident from polls and discussions across the land that while many of our citizens endorse much or all of the legislation that was passed, an equal number do not. This cannot be a situation where the nation is divided so strongly within itself.
Frankly, we are on the horns of a dilemma. We have millions of Americans who either cannot afford health care and health insurance, or who are not considered eligible by insurers. Compassion dictates we help them. On the other hand, extending coverage costs money. We cannot pretend, or play slight of hand with the figures, by postulating future savings. Too often in the past has government promised a benefit at one price and found it costing far greater. We know better. Therefore, only after we run a consecutive budget surplus for two years, we will know we are in a position to consider increasing our government expenditures for health care. We will not plan to spend money we do not have. To do so is to offer a false promise to those getting the benefits - it is a promise made today that we cannot keep tomorrow.
Our new focus in the reform of healthcare will not be the extension of benefits, but rather the reduction of costs. The cheaper healthcare becomes, the more people will be able to receive it on their own. It is not by more government intervention, but by promoting innovations and cost reductions that we will extend health care to more families. Nearly everyone has a TV. Why? Because they are cheap, not because the government provides them. Where it is most necessary, the government will continue to provide compassionate care with the understanding that it is not limitless.
Healthcare takes me naturally to our next national need - our national health. We are literally killing ourselves and driving up our national health care costs as we do it. The percentage of overweight and obese citizens in our country is unacceptable. The same is true for smoking. The good news is that number of smokers in this country is half what it was 50 years ago. The same thing can be true for being overweight. Diseases like diabetes, heart conditions, joint problems, are all aggravated or even instigated by being overweight. Treatment of these conditions pushes up healthcare costs for everyone. What’s more, our military is having increasing problems with recruits who are not physically fit. This is a problem we can solve ourselves. It is time for America to literally shape up. At no time in our history have we been more out of shape as a nation than we are today. Your government cannot fix this. We cannot legislate thinness, but we can give you an incentive to be healthy.
I will introduce to Congress the “Healthy America Act.” This will cover all those receiving health insurance benefits from any federal government program. Persons, who in consultation with their doctors, actively manage their health, stop smoking, avoid drug abuse, and bring their weight and other health factors such as blood pressure and cholesterol into proper ranges through diet, exercise and proper medication will receive better coverage than those who do not. If you want to be overweight and out of shape and sick by your own choice, you have that option. America is a free country. But, please, do not expect your fellow citizens to foot the bill for your chosen behavior.
As we approach April 15, we are all painfully aware of how distorted and complex our tax code has become. We have created an entire industry of tax preparers to help ordinary citizens give the government its due. We have taken a simple system whose purpose is to provide revenue for the government and turned it into the most byzantine form of social engineering. The larger the code has become, the more special interests have a section they wish to protect and the harder simplification is. Chipping away at the problem is futile. We will take a sledgehammer to it.
I will introduce legislation titled the “Simple Tax Act.” This will eliminate all deductions and special treatment of incomes. It will reduce the overall tax rates to make up for those changes. Obviously this will put some people at a disadvantage, like those who deduct mortgage interest. We will give people ample notice and phase in the provisions so that taxpayers have time to adjust, but adjust we will. Our goals are simple: you will be able to do your own taxes, and, we will have enough money to run the government. This system will not be perfect, but it will be better.
On the subject of having enough money to run the government, it should be clear to everyone hearing these remarks that we have a problem in this regard. We have been spending more than we have been taking in for approximately the last 10 years. The plunge in our economy made a bad situation even worse. Lately, we have been overspending to the tune of about 1.3 trillion dollars each year. This has driven our total deficit to more than 14 trillion. As the executive officer of this nation, let me say clearly that this is totally unacceptable. Just as reducing nuclear arms makes our nation safer, so does reducing our national debt.
While we will do our best to control spending, it is clear that we also need to increase government revenues in the short term. The best way to do this is to stimulate the economy so that more taxpayers have bigger paychecks and pay more in taxes. That is ideal and we will work toward that end. In the meantime, we will raise tax rates on higher incomes and certain commodities that will help move us in strategic directions we need to take as nation. I will do my best to hold these taxes to the minimum required. However, unless we begin paying our own way in the here and now, and stop borrowing from the future, we will find ourselves in the unenviable position of some European countries who have for years extended benefits beyond what was fiscally responsible. They are now facing drastic reductions accompanied by riots in the streets. Our aim is to make modest changes to prevent drastic ones. Whether we like it or not, in our hearts we know this is necessary.
At the same time we are getting our fiscal house in order, we must realign our expenditures to prepare ourselves for a prosperous future. We are falling behind in the areas of education, infrastructure, and energy innovation. We are living off the achievements of past generations. Bridges, tunnels, sewers, power lines, and roads built decades, even centuries ago, are in need of repair and replacement. Our interstate highway system designed for the age of the automobile needs to be complemented by other forms of high speed transportation. Our dependence on oil, whether imported or domestic, to power our economy makes us vulnerable to economic disruption. Over the long haul, it makes us dependent on an increasingly expensive and decreasingly available energy source. The same is true for other hydrocarbons like natural gas and coal, although their supplies will last longer than oil.
We cannot manage our nation’s energy supply for this year or even this decade, we must do so for the next 100 years. If we want America to prosper in the 22nd century as it has in the 20th, then we must aggressively develop non-carbon energy sources in abundance. The marketplace will do this for us. Unfortunately, the marketplace on its own may not recognize and respond to the problem fast enough to avoid economic calamity. Price is the driver of choice in our economy. The higher the price, the less we use. I will introduce legislation to slowly raise the tax on oil from all sources in order to make alternative energy more competitive. In short, we will cause the market to do sooner what it would naturally do later when acute shortages would drive up prices rapidly. This will enable us to transition our energy economy so that we can remain a global leader.
When it comes to education, if we can put a man on the moon, we can educate a student in a classroom. We will find a consensus among leaders in the field so we can define effective learning methodologies. We will provide funding for schools to use those methodologies. We will test the students to see the results. If you do not pass, you will not advance. We will not measure and reward activity like graduation rates. We will measure and reward competence among both the faculty and the students. Trying is not good enough for America. Succeeding is.
We will push hard for schools with poor parental involvement and minimal parental support for education to get extra resources to compensate for this missing element at home. But we must all keep in mind, that no school can do what a parent will not do. It is past time that we, as parents, told our kids in no uncertain terms to put away the video games, stop texting, and do their homework, and do it well. If we continue producing marginally literate graduates, whose best work is a 140 character Tweet, we are all in trouble. Every generation depends on those coming after it for its sustenance in old age. As parents, grandparents, and as citizens, we have a personal stake in getting this right.
One scourge of our youth, and even those well past adolescence, is drugs. We have an epidemic in progress involving all manner of substances. Drugs contribute to problems with theft and violence, health care costs, prison costs, domestic abuse and child neglect, and others. Fix the drug problem and many other problems get better. Going forward, there will be greater law enforcement activity in the area of drug enforcement coupled with increased treatment, and when necessary, tougher sentences. To make that effort easier, we will decriminalize the use of marijuana. No longer will police be chasing after pot smokers when serious offenders deserve serious attention. At the same time, we cannot simply open our culture to potential drug abuse with marijuana.
To that end, I will introduce the “Marijuana Regulation Act.” Its basic provisions will include the requirement that smokers be at least 21 and purchase a license to smoke marijuana. This license will appear as an endorsement on their driver’s license or personal identification card. The license will be renewed with the renewal of the driver’s license providing the user provides a doctor’s proof that they are not addicted or otherwise impaired through their use. This same type of legislation will be offered for the consumption of alcohol and smoking regular tobacco products. In this fashion, those who want the privilege of using alcohol, marijuana, and tobacco will have it. And, we as a nation, will have some ability to monitor and control it. If you become medically impaired from your use, you will no longer be able to legally purchase the substance. Likewise, employers will be able to examine a person’s license to determine an individual’s “substance use” status. Both individuals and employers will be free to make their own choices.
Jobs are on the minds of everyone. The good news is that about 90% of our workforce is working. The bad news is those who aren’t and those who could be working at better paying jobs. We will continue to do whatever we can to get our economy back on its feet. But let me be clear, government does not control the economy and it does not make jobs. The economy is a complex mechanism with many parts some of which we can influence, but few of which we can control. When it comes to jobs, private industry is our engine for job growth. We will work with private enterprise to find ways to adjust taxes and regulations to make America a haven for responsible businesses.
The role of your government is to make it easier for private firms to start businesses or grow businesses within our borders. We will not do this any longer by “stimulating” the economy with government spending. That is over. Our stimulus spending has only robbed future consumption and pulled it into the present. A good example was the tax credit that provided an incentive to purchase a home earlier this past year. It drove up purchases prior to the end of the credit and then they dropped and stayed down afterward. We did not create additional demand for housing, we merely dragged it forward in time. It was a sugar high for the housing industry. So was “cash for clunkers” for the auto industry. We are not doing programs like those again. Our focus is on education and infrastructure for the long-term.
For those of you on unemployment, we will continue to do our best to sustain you until the economy recovers. To the extent that, as a nation, we can keep people in their homes and avoid future disruption to the housing market, we need to do it. Unemployment is temporary, not permanent welfare. It will go away. For those reasons, I support it.
Lastly, I need to reassure those of you currently on Social Security and Medicare that we will work diligently to uphold the benefits that you rely upon. By the same token, this is to put on notice anyone not yet enrolled in those programs that you should not expect to get the benefits past enrollees have received. It is simple math that the percentage of our government budget spent on social programs has increased and increased with each year those programs have been in existence. We are now at the point where our aging population relative to our working population makes these programs unsustainable on an indefinite basis. There is no pile of cash under the capitol dome to pay for future Social Security or Medicare benefits. These programs operate by the current workforce paying for the benefits the current recipients are getting. In the past, there has been a surplus of payments over expenditures and the programs operated “in the black.” However, the government did not set this surplus aside as gold or currency. It was spent and replaced with IOUs from the treasury to the programs. These are essentially IOUs to ourselves. We borrowed from Peter to pay Paul and at some point Paul must pay Peter back. As citizens and taxpayers, we are both Peter and Paul. Meeting the IOUs that will come due in the future will require increased tax revenues. We are staring down the barrel of a loaded gun. Changes to Social Security and Medicare for future beneficiaries can no longer be “off-the-table.”
As noble as it is to support our sick and our senior citizens as a government, it will bankrupt us at the rate we are going. A dollar spent on these services has a far different effect on our nation than a dollar spent on education or infrastructure. Education and infrastructure are investments in our national future that will sustain us all. Social payments are a current expense paid to the beneficiaries. In the cases of Social Security and Medicare, we must balance compassion for some with responsibility to all.
In closing, let me encourage every citizen, regardless of your politics, to be actively engaged in improving your health, your government, your community, your schools, churches, and most importantly your families. America will be as great as we make it, not as we wish it. Thank you.
If I were the president, this would be my state of the union address. This was prepared prior to the president’s speech on Jan. 25, 2011 with some slight revisions and additions afterward. Similarities between this piece and President Obama’s remarks are entirely coincidental.
Greetings, fellow Americans. Let me begin this address by asking our Congressional representatives to “cross the aisle” and join with the other representatives of their state and sit together through these remarks. We are not a nation of Democrats or Republicans. We are a nation of United States and that is our strength. For too long this aisle has stood as symbol of a nation divided by politics and not united by values. If our joining together here and now is good, so it should be for every state of the union address and for every day this chamber is in session. From this day forward, let this body work as one for the success of our country. So, Mr. Speaker, I ask you, “Close down this aisle.”
Let me address the state of our nation. It is mixed. If you are in a corporate boardroom, it is improving significantly. If you are in an unemployment line in Memphis, it is not. If you are drawing a large bonus on Wall Street, it is good. If your home has been foreclosed in Las Vegas, it is bad. In short, we have a nation where some of us are doing very well and many of us are not. The problem is not with the success of some, it is with the failure of many to achieve that same success. We will not make our nation wealthier by taxing the rich and subsidizing the poor. We will only have prosperity by preparing our workforce to generate and share a larger economic pie.
The persons in our workforce who got the message about staying in school, learning, and applying their talents are generally succeeding in America. Our formula for success still works. It is no guarantee, but it is a proven path for many. On the other hand, it seems like we have a growing part of our population that believes school is not worth the effort, that working hard for an employer is too inconvenient, and that good jobs with good pay should be given to them anyway. To this group I say, “Wake up!” That doesn’t work. You cannot skip school, do dope, get pregnant in high school, or choose your spouse foolishly and expect to succeed. In America, you earn your prosperity, it is not given to you by someone else. Get serious. Don’t just attend school, learn to read, write, and do math well! Don’t just collect a paycheck, make an effort to improve your employer’s business! If you have the skills of a third world worker, in today’s global economy you will be earning third world pay. As a nation we cannot afford this. It translates into nearly half our households paying no federal income tax. As a government, we will try to make education accessible and affordable and job opportunities available. It is up to you to do your part to keep this nation strong and prosperous. To those who have skills and are trying hard, but are finding success out of reach in today’s economy, I say, “Keep trying.” We cannot fix the economy over night, but we are working on it and things will get better.
Now, let me address our national priorities. Our priorities are a safe, prosperous and free United States of America. We have sought to achieve that safety by attacking those who have attacked us. We have done it on their turf in Afghanistan. The previous administration judged that Iraq possessed that same potential to endanger us. It did not. We are now disengaging from the war in Iraq. We have stepped up our engagement in Afghanistan with the hope that it will bring us to a faster conclusion there. Our goal is to be disengaged there by 2014. We will meet that goal and accelerate our withdrawal at a rate that prudently protects our forces. We will not remain in either Iraq or Afghanistan in order to prop up their governments. Both countries will have had ample time to put their own houses in order. As an outsider, the United States cannot bring long-term security and stability to these nations. Only when the citizens of those countries act in their own best interests and police the radical elements that bring them grief, will their lives be better. We cannot do for other nations what they will not do for themselves. It is time they stepped up so that our armed forces can stand down and come home.
In addition to drawing down our active military in those two countries, we will also significantly reduce our overseas military presence in peaceful, allied countries. We no longer need and cannot afford to serve as the world’s protector. We must protect our shores first. This is not isolationism, it is pragmatism. The reduction in our military will aid in our overall deficit reduction efforts.
To further strengthen and protect our nation, a portion of the military savings will be used toward increased domestic security. We are not engaged in a “war on terror” that can be fought on a conventional battlefield. We are engaged in a worldwide police action to find, root out, and prosecute those who would harm us where we live. That is a job for our local police and FBI. We will see to it that they are better equipped to do this at home and to do it in conjunction with their overseas counterparts. Furthermore, we will improve the protection of our borders and our ports of entry. By reducing spending abroad, we can improve our defenses at home.
Reducing our military is only one small step in setting our national financial house in order. For far too long your government has not been a prudent steward of its financial resources and has not met its fiscal responsibilities. Your Congress has failed on numerous occasions to accomplish the basic task of approving a budget in a timely fashion to ensure uninterrupted operation of your government. This would never be acceptable in the world of business and it is not acceptable for our nation.
The executive branch has curried favor with the electorate by giving the nation tax cuts that created deficits. We have been borrowing from our future to pay for benefits in the present. In this past year, your government borrowed $0.41 cents of every dollar it spent. You cannot do that and keep your household solvent. Neither can we. This must stop and it will stop. The deficit reduction commission recently made sound recommendations for across-the-board changes in how we raise and spend money. Many people are unhappy with those recommendations. That probably means the commission got it right. We will aggressively pursue implementing those recommendations starting this year. We will not continue to postpone actions to fix problems we know need fixing now.
To drive home the urgency of our need to control spending, balance our budget, and bring down our debt, I will take the following two actions.
First, the operating costs of the Executive function of government will be reduced from their current levels by 20% each year for the next two years. No longer will the White House spend 40 cents we do not have.
Second, by executive order, I will direct all branches of government to reduce spending from current levels by 10% each year for the next four years. This will undoubtedly be a struggle and as a result you may see less service from your federal government. The simple truth is, that through the use of debt, you were getting service that your children and grandchildren will be paying for. They cannot afford it and we will not enrich our time by impoverishing theirs.
We cannot improve our nation without improving the way we govern it. Our constitution is an anchor for our values, but not our methods. We must find ways of managing our nation that are for the 21st century, not the 18th. To that end I will submit the following two constitutional amendments and three bills:
A constitutional amendment reducing the number of representatives in the House of Representatives from its current 435 members to 220 members. The simplest way to have less government is to have “less government.” I challenge Congress to reduce its operating budget by 40% over the next four years in anticipation of this amendment being ratified.
A constitutional amendment limiting the total terms of office for both house and senate members to 18 years or until the end of a full term if the 18 years was reached during a term. Serving in elected office is not a career, it is a service.
A bill called the “One Law Act” requiring that legislation contain only provisions directly related to the primary purpose of that legislation. No longer would individuals in Congress be able to attach pet projects or questionable legislation to ride on the coattails of necessary legislation. We cannot run this nation by using legislative gimmicks to get what we want as individuals.
A bill called the “Right Pay Act” regulating the salaries of elected federal officials, including myself so that salaries are based upon the economic status of the population at large. I do not believe it is appropriate that a Congressperson earns more than $170,000 per year when half his or her constituents are earning roughly one fourth or less of that. I recognize that living in a home state and maintaining a second residence in Washington is a burden a Congressperson faces that normal citizens do not face. If we set Congressional wages at 2.0 times the median family income, then we are closer to reality. We are not trying to set a competitive salary for hiring politicians. We are setting a salary to reflect the prosperity of America. As the country prospers, so will Congress. As for my salary, it will be the same as Congress. To govern with appreciation for our people, requires us to live like the nation lives.
A bill limiting campaign contributions to $100 per person or entity such as a corporation or union. This will be adjusted for inflation with each election cycle. If it this does not pass muster with our Supreme Court because it conflicts with free speech, then we will find something similar that does. Free speech and free money for campaigns are clearly not the same thing. We need the best government we can elect, not the best government special interests can buy.
We will reform healthcare a second time. It is evident from polls and discussions across the land that while many of our citizens endorse much or all of the legislation that was passed, an equal number do not. This cannot be a situation where the nation is divided so strongly within itself.
Frankly, we are on the horns of a dilemma. We have millions of Americans who either cannot afford health care and health insurance, or who are not considered eligible by insurers. Compassion dictates we help them. On the other hand, extending coverage costs money. We cannot pretend, or play slight of hand with the figures, by postulating future savings. Too often in the past has government promised a benefit at one price and found it costing far greater. We know better. Therefore, only after we run a consecutive budget surplus for two years, we will know we are in a position to consider increasing our government expenditures for health care. We will not plan to spend money we do not have. To do so is to offer a false promise to those getting the benefits - it is a promise made today that we cannot keep tomorrow.
Our new focus in the reform of healthcare will not be the extension of benefits, but rather the reduction of costs. The cheaper healthcare becomes, the more people will be able to receive it on their own. It is not by more government intervention, but by promoting innovations and cost reductions that we will extend health care to more families. Nearly everyone has a TV. Why? Because they are cheap, not because the government provides them. Where it is most necessary, the government will continue to provide compassionate care with the understanding that it is not limitless.
Healthcare takes me naturally to our next national need - our national health. We are literally killing ourselves and driving up our national health care costs as we do it. The percentage of overweight and obese citizens in our country is unacceptable. The same is true for smoking. The good news is that number of smokers in this country is half what it was 50 years ago. The same thing can be true for being overweight. Diseases like diabetes, heart conditions, joint problems, are all aggravated or even instigated by being overweight. Treatment of these conditions pushes up healthcare costs for everyone. What’s more, our military is having increasing problems with recruits who are not physically fit. This is a problem we can solve ourselves. It is time for America to literally shape up. At no time in our history have we been more out of shape as a nation than we are today. Your government cannot fix this. We cannot legislate thinness, but we can give you an incentive to be healthy.
I will introduce to Congress the “Healthy America Act.” This will cover all those receiving health insurance benefits from any federal government program. Persons, who in consultation with their doctors, actively manage their health, stop smoking, avoid drug abuse, and bring their weight and other health factors such as blood pressure and cholesterol into proper ranges through diet, exercise and proper medication will receive better coverage than those who do not. If you want to be overweight and out of shape and sick by your own choice, you have that option. America is a free country. But, please, do not expect your fellow citizens to foot the bill for your chosen behavior.
As we approach April 15, we are all painfully aware of how distorted and complex our tax code has become. We have created an entire industry of tax preparers to help ordinary citizens give the government its due. We have taken a simple system whose purpose is to provide revenue for the government and turned it into the most byzantine form of social engineering. The larger the code has become, the more special interests have a section they wish to protect and the harder simplification is. Chipping away at the problem is futile. We will take a sledgehammer to it.
I will introduce legislation titled the “Simple Tax Act.” This will eliminate all deductions and special treatment of incomes. It will reduce the overall tax rates to make up for those changes. Obviously this will put some people at a disadvantage, like those who deduct mortgage interest. We will give people ample notice and phase in the provisions so that taxpayers have time to adjust, but adjust we will. Our goals are simple: you will be able to do your own taxes, and, we will have enough money to run the government. This system will not be perfect, but it will be better.
On the subject of having enough money to run the government, it should be clear to everyone hearing these remarks that we have a problem in this regard. We have been spending more than we have been taking in for approximately the last 10 years. The plunge in our economy made a bad situation even worse. Lately, we have been overspending to the tune of about 1.3 trillion dollars each year. This has driven our total deficit to more than 14 trillion. As the executive officer of this nation, let me say clearly that this is totally unacceptable. Just as reducing nuclear arms makes our nation safer, so does reducing our national debt.
While we will do our best to control spending, it is clear that we also need to increase government revenues in the short term. The best way to do this is to stimulate the economy so that more taxpayers have bigger paychecks and pay more in taxes. That is ideal and we will work toward that end. In the meantime, we will raise tax rates on higher incomes and certain commodities that will help move us in strategic directions we need to take as nation. I will do my best to hold these taxes to the minimum required. However, unless we begin paying our own way in the here and now, and stop borrowing from the future, we will find ourselves in the unenviable position of some European countries who have for years extended benefits beyond what was fiscally responsible. They are now facing drastic reductions accompanied by riots in the streets. Our aim is to make modest changes to prevent drastic ones. Whether we like it or not, in our hearts we know this is necessary.
At the same time we are getting our fiscal house in order, we must realign our expenditures to prepare ourselves for a prosperous future. We are falling behind in the areas of education, infrastructure, and energy innovation. We are living off the achievements of past generations. Bridges, tunnels, sewers, power lines, and roads built decades, even centuries ago, are in need of repair and replacement. Our interstate highway system designed for the age of the automobile needs to be complemented by other forms of high speed transportation. Our dependence on oil, whether imported or domestic, to power our economy makes us vulnerable to economic disruption. Over the long haul, it makes us dependent on an increasingly expensive and decreasingly available energy source. The same is true for other hydrocarbons like natural gas and coal, although their supplies will last longer than oil.
We cannot manage our nation’s energy supply for this year or even this decade, we must do so for the next 100 years. If we want America to prosper in the 22nd century as it has in the 20th, then we must aggressively develop non-carbon energy sources in abundance. The marketplace will do this for us. Unfortunately, the marketplace on its own may not recognize and respond to the problem fast enough to avoid economic calamity. Price is the driver of choice in our economy. The higher the price, the less we use. I will introduce legislation to slowly raise the tax on oil from all sources in order to make alternative energy more competitive. In short, we will cause the market to do sooner what it would naturally do later when acute shortages would drive up prices rapidly. This will enable us to transition our energy economy so that we can remain a global leader.
When it comes to education, if we can put a man on the moon, we can educate a student in a classroom. We will find a consensus among leaders in the field so we can define effective learning methodologies. We will provide funding for schools to use those methodologies. We will test the students to see the results. If you do not pass, you will not advance. We will not measure and reward activity like graduation rates. We will measure and reward competence among both the faculty and the students. Trying is not good enough for America. Succeeding is.
We will push hard for schools with poor parental involvement and minimal parental support for education to get extra resources to compensate for this missing element at home. But we must all keep in mind, that no school can do what a parent will not do. It is past time that we, as parents, told our kids in no uncertain terms to put away the video games, stop texting, and do their homework, and do it well. If we continue producing marginally literate graduates, whose best work is a 140 character Tweet, we are all in trouble. Every generation depends on those coming after it for its sustenance in old age. As parents, grandparents, and as citizens, we have a personal stake in getting this right.
One scourge of our youth, and even those well past adolescence, is drugs. We have an epidemic in progress involving all manner of substances. Drugs contribute to problems with theft and violence, health care costs, prison costs, domestic abuse and child neglect, and others. Fix the drug problem and many other problems get better. Going forward, there will be greater law enforcement activity in the area of drug enforcement coupled with increased treatment, and when necessary, tougher sentences. To make that effort easier, we will decriminalize the use of marijuana. No longer will police be chasing after pot smokers when serious offenders deserve serious attention. At the same time, we cannot simply open our culture to potential drug abuse with marijuana.
To that end, I will introduce the “Marijuana Regulation Act.” Its basic provisions will include the requirement that smokers be at least 21 and purchase a license to smoke marijuana. This license will appear as an endorsement on their driver’s license or personal identification card. The license will be renewed with the renewal of the driver’s license providing the user provides a doctor’s proof that they are not addicted or otherwise impaired through their use. This same type of legislation will be offered for the consumption of alcohol and smoking regular tobacco products. In this fashion, those who want the privilege of using alcohol, marijuana, and tobacco will have it. And, we as a nation, will have some ability to monitor and control it. If you become medically impaired from your use, you will no longer be able to legally purchase the substance. Likewise, employers will be able to examine a person’s license to determine an individual’s “substance use” status. Both individuals and employers will be free to make their own choices.
Jobs are on the minds of everyone. The good news is that about 90% of our workforce is working. The bad news is those who aren’t and those who could be working at better paying jobs. We will continue to do whatever we can to get our economy back on its feet. But let me be clear, government does not control the economy and it does not make jobs. The economy is a complex mechanism with many parts some of which we can influence, but few of which we can control. When it comes to jobs, private industry is our engine for job growth. We will work with private enterprise to find ways to adjust taxes and regulations to make America a haven for responsible businesses.
The role of your government is to make it easier for private firms to start businesses or grow businesses within our borders. We will not do this any longer by “stimulating” the economy with government spending. That is over. Our stimulus spending has only robbed future consumption and pulled it into the present. A good example was the tax credit that provided an incentive to purchase a home earlier this past year. It drove up purchases prior to the end of the credit and then they dropped and stayed down afterward. We did not create additional demand for housing, we merely dragged it forward in time. It was a sugar high for the housing industry. So was “cash for clunkers” for the auto industry. We are not doing programs like those again. Our focus is on education and infrastructure for the long-term.
For those of you on unemployment, we will continue to do our best to sustain you until the economy recovers. To the extent that, as a nation, we can keep people in their homes and avoid future disruption to the housing market, we need to do it. Unemployment is temporary, not permanent welfare. It will go away. For those reasons, I support it.
Lastly, I need to reassure those of you currently on Social Security and Medicare that we will work diligently to uphold the benefits that you rely upon. By the same token, this is to put on notice anyone not yet enrolled in those programs that you should not expect to get the benefits past enrollees have received. It is simple math that the percentage of our government budget spent on social programs has increased and increased with each year those programs have been in existence. We are now at the point where our aging population relative to our working population makes these programs unsustainable on an indefinite basis. There is no pile of cash under the capitol dome to pay for future Social Security or Medicare benefits. These programs operate by the current workforce paying for the benefits the current recipients are getting. In the past, there has been a surplus of payments over expenditures and the programs operated “in the black.” However, the government did not set this surplus aside as gold or currency. It was spent and replaced with IOUs from the treasury to the programs. These are essentially IOUs to ourselves. We borrowed from Peter to pay Paul and at some point Paul must pay Peter back. As citizens and taxpayers, we are both Peter and Paul. Meeting the IOUs that will come due in the future will require increased tax revenues. We are staring down the barrel of a loaded gun. Changes to Social Security and Medicare for future beneficiaries can no longer be “off-the-table.”
As noble as it is to support our sick and our senior citizens as a government, it will bankrupt us at the rate we are going. A dollar spent on these services has a far different effect on our nation than a dollar spent on education or infrastructure. Education and infrastructure are investments in our national future that will sustain us all. Social payments are a current expense paid to the beneficiaries. In the cases of Social Security and Medicare, we must balance compassion for some with responsibility to all.
In closing, let me encourage every citizen, regardless of your politics, to be actively engaged in improving your health, your government, your community, your schools, churches, and most importantly your families. America will be as great as we make it, not as we wish it. Thank you.
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