Budget and Deficit

Trim Deficit? Only if Bush Uses Magic
By EDMUND L. ANDREWS Published:
February 7, 2005, NYTimes

But Mr. Bush has focused almost all of his budget cuts on discretionary domestic programs costing a total of $466 billion last year. Freezing spending at current levels on the vast array of programs Washington supports - thus allowing them to grow simply at the rate of inflation - would save about $10 billion next year, according to the Congressional Budget Office; a politically difficult reduction of 1 percent would save about $15 billion.

In all, Mr. Bush has vowed to cut or eliminate 150 government programs. But Republican Congressional analysts predicted on Friday that those cuts would be unlikely to save more than $15 billion. And even those savings may not materialize.
Last year, Mr. Bush called for cutting or eliminating 65 programs, for a total projected saving of $4.8 billion. But Congress agreed to eliminate only four of those programs, for a savings of less than $200 million.

For Mr. Bush to fulfill his promise of cutting the deficit in half by 2009, Mr. Riedl said, the president would have to cut $200 billion from domestic programs that now cost less than $500 billion a year.
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Is the Bush Budget realistic? Hardly--it not even including funding for Iraq and Afghanistan. The real disaster comes in the attack upon Discretionary Spending programs, which Congress will never allow Cuts sufficient to provide any major reduction of Spending. Entitlements absorb the greatest share of Federal Spending, and are scheduled to absorb far more as Retirees and higher Costs kick in. Economists must unify in the call to limit Entitlements in an effective, but protective manner.

The Author's own Proposals:
(Remember he himself is a Baby Boomer.)

1) Establish a One-Size Benefit for Social Security. It raises the Cost of SS Benefits in the near term, but could cut Fund Expenditures by a loose estimate of 14% over the Period until 2042--the listed Date of Fund exhaustion. The One-Size Benefit has the advantage of being Wage-indexed, so Beneficaries are not penalized by lack of participation in economic growth. It can be justified by the increasing Costs of Medicare, to the point variations in FICA tax contributions mean little. It can be grandfathered in, even with Us Baby Boomers, so current High-Drawers will not get COLAs until they are in-line with the One-Size Benefit. Now is the time for the Switch in Benefits, while there are still larger FICA tax contributions than there are Fund Outlays.

2) We must turn Medicare and Medicaid into basic Coverage programs paying a set maximum per year, but not covering catastrophic illness care. Hospice, Pain-killing Drugs and Procedures, or necessary Rest Home care, will not contribute to the maximum limit.

3) Defense Department Expenditures must be unified; this means absolutely no extraordinary budget measures. Law--or Constitutional amendment--must dictate Congress must pass a whole Defense Budget, which must not be amended inter-Year by additional appropriations without added Tax Surcharge on Income Taxes, said Year Defense Budget to be totally underwritten by Taxation, with the Secretary of Defense charged with transference of Funds from Weapons Development to meet Deployment expenses, Troop Outlays, and necessary Equipage supply. Homeland Security will be entailed by like Law with such Budgetary stringency. Special Funding for Areas of Conflict (say Iraq and Afghanistan) will not be introduced without surcharge taxation on Income.

4) Tax Law will be amended, so Tax Credits for Investment, Recapitalization, and Stock Grants or Stock Options, shall not each exceed more than 10% of Gross Taxable Income of Business Enterprise.
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The Wish List could go on forever, which is one of the problems of Tax Law: Legislators thinking they can tweak the system for better performance, with constant and ongoing Special Measures; such bringing no great Tax relief, while eroding Tax revenues drastically. lgl