"There is a workable plan for fixing much of what ails the economy"

"There is a workable plan for fixing much of what ails the economy"
By Tom Flake - Wednesday, July 06, 2011

Long time readers will note that my positions are not normally taken without research taken from primary documents and the same applies to the current budget debate.

The Ryan plan, which serves as the launching point for Republican negotiations, takes the position that Medicare, Social Security and Defense are the Federal Government's largest expenses and are those areas most in need of cutting if the current budget is to be brought closer to balance.

Under the premise that the "Right is Wrong", I would submit that Social Security and its attendant costs should be left alone. "Why?", you might ask? Because the Social Security system and its attendant taxes currently run a surplus when including the interest it earns on the Social Security Trust Fund. You can find the details here. I could go on at length about how 7% Social Security Tax plus 7% employer match if invested by the employee in the market would be much better for the employee. I could go on at length about how Social Security is essentially indentured servitude by those living shorter lives (black men) for the benefit of those living longer lives (white women). This article is primarily interested in what is currently on the table, not what should be on the table in an ideal world.

File what follows under "the Left is Wronger" moniker.

If you exclude Social Security from what's on the table, that leaves Medicare and Defense for cuts and tax increases and elimination of deductions for revenue increases. Since the Democrats have never met a government program they didn't like, significant cuts to Medicare are unlikely to get their support, yet this is a program that is only 76% funded by the taxes collected for the program. The rest must come from general taxes collected. The math here is easy. Cut the program expenditures by the amount of the shortfall. My recommendation is to start with the unfunded drug benefit. Using the taxing power of the government to pay for drugs which people do not earn enough to pay for on their own is NOT the proper role of government. When the government is borrowing money from our enemies and competitors using their (non-voting) children's credit cards to buy their grandparents medication, it should be categorized as criminal negligence or treason.

Cutting Medicare to a size congruent with taxes collected for Medicare would not balance the budget, but it frames the argument correctly. Since Social Security pays for itself, and Medicare if cut to the size congruent with taxes collected for that purpose would essentially pay for itself, then the rest of the cuts would need to fall squarely on the Department of Defense and other discretionary programs. These cuts need to be 10% of the federal budget every year for the next three years, with a re-evaluation at that time. This would be a $340 billion (roughly) cut this year, a $300 billion (roughly) next year and a $280 (roughly) cut the following year.

This $920 billion in cuts over three years, would do two things. If would reduce the deficit to something more manageable (about $500 billion) and by doing so would reduce the "crowding out" effect that government borrowing has on the private sector. That is, if the Federal Government stops borrowing so much, then creditors have to put that money to work in other areas. (the private sector) This is really the area where the Left is totally devoid of ideas, how to grow the private sector. They either realize this but have a different agenda or they are ignorant of the fact that government borrowing negatively impact funds available for private borrowing.

So let's sum up. Leave Social Security alone, cut Medicare to the size consistent with the taxes collected for that purpose and cut the rest of the Federal Bureaucracy 10% a year over 3 years. Stimulate job creation by reducing Federal borrowing and there is a workable plan for fixing much of what ails the economy.