As a voter and a taxpayer, I must say that the behavior of congress concerning the budget of late has been disappointing and frustrating to watch, on both a national, and a state (California) level. Both governments are presented with similar dilemmas, in that they have obligations to pay out more money than they have (like most Americans these days, unfortunately). The Democrats want to raise taxes, and the Republicans want to cut spending.
Both solutions would work on their own if taken to the extreme: given infinite revenue, or zero expenditures, the government would have no problem staying afloat. In fact in California, the Republicans refused to budge on their stand against more taxes, so the budget approved by the governor has brutal cuts to offset the lack of an increase in reveue. Now the Republicans are complaining about where the cuts were made (something about not be able to have your cake and eat it too). While not ideal, without increased revenue through taxes, cuts have to be made everywhere, and the level of cuts necessary are very bad or us. But that’s the conundrum, is that neither solution is the correct answer, they both are.
Standard macro-economic theory states that in times of recession, the federal government needs to lower taxes, and increase spending to promote stimulus. A problem that arises if these tenants are followed is that greed must be avoided. We, the taxpayers, have spent billions providing stimulus funds to businesses already, but instead of spending the money to hire people, the businesses have been hoarding the money. Obviously some stricter regulation is in order, and if businesses do not use the funds, they must be revoked, but that is for another time.
By lowering taxes and increasing spending, the government is going to increase its debt; this is an unavoidable but necessary measure. Once we are out of the recession, the government then needs to raise taxes and decrease spending to payoff the debt they accrued when they were trying to stimulate the economy. Clinton was the only one to have a budget surplus since the start of the Cold War. Every Republican president in my lifetime (Reagan, Bush I, Bush II) increased the national debt, so I don’t understand why the Republicans are such hard liners nowadays about reducing debt, to the detriment of us all. Anyhow, under Clinton, the federal government had a budget surplus for the first time in decades, and was projected to continue to have surpluses. The dotcom bubble bursting and two wars in the Middle East put a wrench in the works, but the principles were sound.
To recap, the Democrats want to raise taxes, and the Republicans want to cut spending. Economic theory states we should do the exact opposite and lower taxes and increase government spending. Like most economic theory that is inherently flawed, it assumes we are rational consumers (we aren’t) that pays off our previous debts before borrowing again (we don’t). So, we couldn’t increase spending if we wanted to, because we can’t borrow money. We aren’t good for it; just ask China. Because of this we need revenue from somewhere, and the only reasonable source is the taxpayer. But not to fret, even if they raise taxes, we’re currently at the lowest tax percentage in a very long time (especially for those lucky individuals at the top of the pay scale), so we’ll only be going back to where we were 15 years ago. We had our fun, time to get serious about funding our government. That takes care of revenue.
Now that we have money, we can disperse it to the populace in the way of social services. But we can’t give it all away, we still have to pay off our debt, so we do have to cut spending so we have some money to keep the Chinese off our backs.
Here are a few recommendations to cut spending:
1. Everyone who is an elected official gets minmum wage; you are in government becomes you love democracy, not for the paycheck. They are mostly part-time employees anyway who take an excessive amount of holidays.
2. To get any type of government aid be it disability, WIC, food stamps, whatever, if you are over the age of 18, you must have a high school diploma or equivalent, or you are ineligible. I believe that everyone should graduate high school, and if you aren’t willing to participate in a free education supplied to you by the government, and are voluntarily taking yourself out of the workforce (almost no one hires anyone without a diploma these days), then the government should cut you off.
3. Any type of welfare has strings attached and hard expiration dates. Also, as a means of earning your government stipend, you must participate in public works. Similar to the projects that were enacted during the Great Depression to keep people employed, if the government is going to cut you a check every month, you should have to work for it. If you have a skill set, I’m sure they could find a use for you, if not, there is always litter to pick up and graffiti to remove. City beautification and keeping people honest at the same time.
4. Put a cap on government pensions so as not to exceed 100,000 dollars. No one deserves to collect nearly 300,000 a year pension, as is the case for some of the government employees in my area. Of course if they were making minimum wage this wouldn’t be an issue.
So contrary to economic theory, because we have dug ourselves into so deep a hole, we have no choice but to raise taxes and cut spending. Now if only the respective parties of government could realise that they are both correct and meet in the middle, we could be out of this mess hopefully within 20 years. It’s not going to be easy, or enjoyable, but it must be done, and it must be done now. We elect people to make the hard decisions so we don’t have to. If they aren’t willing to make the tough calls, then what?