Six Steps to a (More) Balanced Budget

Jul 27, 2011

FCNL recommends that the nation should get out of the debt crisis by following the path that brought us in: inflated military spending and inadequate tax income. The following steps would stabilize the debt and result in lower deficits over the next decade.

1. Reduce discretionary spending (the spending that is appropriated every year by Congress). Since military spending has doubled in the last decade and makes up more than half of all discretionary spending, at least half of all discretionary spending cuts should come from the military budget. The bi-partisan Sustainable Defense Task Force has identified nearly a trillion dollars in military spending reductions that could be adopted over the next years without affecting the security of the U.S. Sustainable Defense Tax Force

2. Reduce spending through the tax code (tax expenditures). Though corporate tax rates are set at 35 percent by law, corporations actually pay an average of 15 percent (effective tax). Twelve of the largest and wealthiest corporation (including General Electric, Dupont, Boeing, Exxon, Verizon and Yahoo) paid an average tax of negative 1.5 percent on combined earnings of more than $171 billion over the last three years. Closing tax loopholes, especially those that do not promote good public policy, is a fair way to raise revenues. Historic low effective tax rate, Comparative low effective tax rate, Corporations paying negative taxes

3. End the wars. Both major parties now seem to agree that ending the wars in Afghanistan and Iraq will save about $1 trillion over the next decade. The “base” military budget – the Pentagon’s ongoing budget – is also inflated (independent of war spending) and should be a prime place to look for savings. Fact sheet from Senator Reid proposal 7/25/11

4. Get a handle on health care spending. The Affordable Care Act, which is gradually going into effect, is projected to decrease the deficit $210 billion over the next decade. Improvements to the system, such as removing for-profit insurance companies from the center of health care finance equation, would save even more. Short sighted changes, such as getting rid of the “CLASS Act” – a provision of the Affordable Care Act that subsidizes and promotes the purchase of home health care insurance – will just place more pressure on Medicaid and Medicare programs in the future. (The Gang of Six proposal would end this provision.) “Gang of Six” Proposal Summary ,  Congressional Budget Office Affordable Care Act estimate

5. Invest in direct job creation. Congress’s attention to job creation (since the Recovery Act) has been primarily on easing the tax burden of employers. While small businesses may carry a significantly higher effective tax burden than the large, wealthy corporations referenced above, tax breaks alone will not create employment. Small business advocates lobbying on Capitol Hill and speaking out around the country emphasize that – more than anything else – they need customers able to buy their products and services. Unemployed people need jobs before they can be customers; we need some direct supports for job creation. Main Street Alliance letter to President Obama

6. Protect the most vulnerable. The wealthiest one percent of all households lost about 20 percent of their income in 2008. but the record gap between high and low incomes grew is still dramatic. Among middle income households, many lost everything – their jobs, their homes, their savings, their health care. And among the poorest, many became – and are – destitute. Thirty-five percent of African American households and thirty-one percent of Hispanic households had zero or negative income in 2009. Cutting the services and benefits for the poorest families and individuals is fundamentally unfair, and is short sighted for a country that needs to strengthen its future economy. Wealthiest households,  Racial wealth disparities

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The six steps outlined above would help to stabilize the economy and put the nation in a place where it can afford the kind of society we have come to expect.

We are a nation that expects to be able to

• use roads, highways, and airplanes that are safe,
• buy food in groceries and restaurants without fear of epidemics,
• rely on the quality of the education of upcoming generations, so that they might deal with the problems we leave behind,
• send our children to good quality schools – from kindergarten through college and training schools,
• have access to high quality health care and to major communicable diseases under control,
• care for our elders, providing a reliable base of income and health services,
• care for our children -- regardless of the income and circumstances of their families,
• have functioning and well-trained police, firefighters and other first responders in our communities,
• have forests, parks, green spaces and rivers preserved and open for our adventures and vacations, and
• have public libraries, national monuments, museums, and other resources available for our learning and appreciation of the past and possible futures.

As a nation, we can afford these things – these hallmarks of who we are. All that’s needed is a new look at how we prioritize our spending, and how we support our budget with fair revenues.