Tuesday, February 9, 2010

Cut spending to avoid deficit disaster

The Obama budget with $2 trillion dollar deficits isn't going to work. Obama has jacked federal spending up to 25% of GNP. That's way way up from the historical average of 19% going back to WWII. And it's way way short of tax revenues which have sunk to 14% of GNP due to Great Depression 2.0. The deficit (difference between spending and tax revenues) come out to 11% of GNP.
The only way to survive is to cut the spending. Not freeze it, cut it back to 19% of GNP, or farther. This is hard, 'cause those receiving our tax money will fight like tigers to keep receiving it. The general taxpayers don't get as motivated as the feeders from the federal trough do. Perhaps the Tea Party can help out here.
What to cut? Answer, anything you can.
Start with farm subsidies. There aren't very many farmers in the country, we ought to be able to out vote them.
Turn off the federal highway program. We built the Interstate system in the '60's and 70's. It's finished, done. we have superb highways to every corner of the nation. Let the states do the maintainance and stop rebuilding them.
Close down EPA. They were created to clean up smog over the cities. That's done, air over Boston, NYC, DC and Philly is clear and blue, not the yellow muckiness we had in 1970.
Close down OSHA. The real work of safety inspection is done by the insurance companies. Every business carries insurance, and those insurance companies hate paying out for injured workers. So they inspect, and tell management to make safety improvements or loose their insurance. OSHA just gets in the way.
All of the above is to show that we are serious. The real budget busters are Medicare, Medicaid and Social Security. They are taking up 75% of federal outlays, and to cut spending, we have to cut these sacred cows.
For Medicare/caid we have to reduce the costs. Start with malpractice reform. Allow interstate sale of health insurance, that's competition and competition always lowers costs. Allow duty free import of drugs from any first world country (Canada!) to bring the price of drugs down out of the stratosphere. Getting these three simple changes thru would make a big improvement. There is a lot more that can be done, but lets make a start.
Social Security is harder. We have paid in all our working life and planned our retirement on the basis of social security income. About all that can be done is raise the retirement age. When Social Security was started, the retirement age was set at 65, and the life expectancy was only 65. In 2010 the retirement age is still 65 but life expectancy has soared up into the 80's. Surely we could arrange to move increase the retirement age, slowly, up to 68 or 70.

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