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Are Congress, president truly incapable of action to balance the budget?

Wednesday, August 15, 2012

It wasn't an upbeat townhall meeting.

Sen. Mike Johanns, a former governor, mayor and U.S. Secretary of Agriculture, used pie charts to spell out just how difficult it will be for the federal government to bring the ballooning deficit under control, let alone reduce it or begin paying off the national debt.

Hosting a townhall meeting Tuesday evening in the Keystone Business Center, Johanns explained that by promising not to touch entitlements like Medicare, Medicaid and Social Security, or defense spending, a potential senator or member of the House has pledged not to touch more than 80 percent of the federal budget. That clearly won't solve the problem.

Johanns, has been meeting with other members of the "Group of Eight" bipartisan senators to take a serious look at entitlements, traditionally the "third rail" of politics -- touch it and you die, or at least your chances of being re-elected do.

After about a 15 minute talk, Johanns heard questions and comments, ranging from a suggestion that the government change the color of cash and collect taxes when it is exchanged, to another opinion that Congress and the president are incapable of doing anything about the budget problem.

With mandatory $1.2 trillion cuts programmed to kick in come January, Johanns joined others in congress championing a new look at the Simpson-Bowles plan, drawn up but not offically adopted by the National Commission on Fiscal Responsibility and Reform in 2010.

The Simpson-Bowles draft proposal had five parts:

1. Reduce discretionary spending by $200 billion a year, including 15 percent of defense procurement and closing a third of overseas bases, eliminate earmarks and cut the federal workforce by 10 percent.

2. Increase tax revenues by $100 billion through reforms like a 15 cent per gallon gasoline tax and ending tax deductions such as home mortgage interest deductions and deductions for employer-provided healthcare benefits.

3. Controlling health care costs by maintaining the Medicare cost controls associated by health care reform legislation, and consider a public option.

4. Reduce entitlements such as farm subsidies, civilian and military pensions and student loan subsidies.

5. Modify the Social Security program to raise the payroll tax and the retirement age.

Something for everyone to hate, right?

Well, consider this: Since the "supercommittee" failed to find $1.5 trillion in cuts, those mandatory across-the-board $1.2 trillion in cuts are likely to be even less popular.

The alternative to real changes to bring our federal budget back into some semblance of balance is letting our financial situation slide down an ever-steepening slope toward collapse.

Are Congress and the president truly incapable of making the changes needed to prevent that from happening?

Let's hope that opinion is wrong.


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In my opinion, the problem lies with the promotion of a failed economic system based on rewarding individuals and business entities on their perceived ability to create jobs and stimulate the economy. Unproven tax cuts and other forms of incentives have been allowed to continue way longer than was necessary to prove their ineffectiveness to meet the target goals of the incentive. Would a farmer continue to plant the same corn seed year after year if it didn't produce the desired results?

Multinational corporations and wealthy individuals can legally defer their tax obligations (sometimes for decades)by transferring earnings into offshore subsidiaries. This has had a devastating effect on our Governments ability to collect "owed taxes" in a timely manner, and has caused the tax revenue stream to decline dramatically.

This in turn adds additional burden on the remaining tax payers to make up the difference in lost revenue or by reducing government programs and employees to compensate for the loss. This is where our country is at currently.

By utilizing lobbyists and campaign contributions as tools to implement changes in the tax code and other laws, these entities are able to sit on their deferred tax obligations until they are able to bring them home at a ridiculously reduced tax rate - as in the case of the 2003 Repatriation Tax Holiday with a tax rate of 5.2%. How many small businesses could continue to function if their clients could legally postpone payments for products and services rendered for years into the future, or reduce the amount owed by 85%?

Until our country addresses the policies and practices that have allowed the deferral of tax obligations to sometime in the future - if ever - we will continue on that downhill slide regardless of how many new jobs are created. As we now see with our own eyes, the middle class can not pay for the Corporate Tax Cuts or the Tax Cuts for the wealthy which were sold under the misrepresented guise of potential job creation.

-- Posted by Geezer on Wed, Aug 15, 2012, at 4:53 PM


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