If we managed our family checkbook like the federal government, we would all be bankrupt. It is one thing having deficit spending in wartime or particular crises. It is quite another to simply print money, sell T-Bills and leave $30T for future generations to manage. It is immoral, unconscionable, and terrible economics. We have tried to be a warfare and welfare states since the 1960s and we must alter course.
In this essay, I am not ranting about the current administration’s out-of-control spending and highly political largesse for voters. Anyone can do that. I am not going to lambaste both parties for their refusal to trim waste and remember that all the money they spend in Washington, D.C. originates with taxpayers. I am going to offer a way forward that is at first glance naïve and simplistic, but upon further reflection, incorporates the insights of leading thinkers of the last half-century and is non-partisan and non-ideological.
I think we must argue about spending priorities, just like the family dinner table, a small business, or the corporate boardroom. I think we must argue about a fair tax system, from flat taxes, modified flat taxes, progressive tax rates, and levels of corporate taxation. Let the debates begin in the House of Representatives where they belong, and let Congress do its job.
We also forget that decentralized administration is almost always more efficient and fairer, so it should be a long-term priority to have our states, counties, and cities receive a larger portion of our tax dollars and Washington, D.C. much less.
OK, here are three simple points that will transform our economic future, without starving anyone or leaving America defenseless.
ONE: We must achieve a truly balanced budget ASAP, preferably in the next five years, beginning with significant deficit reductions and then living within our means. What does this mean? Here are some ways forward under this heading:
- Reduce ALL federal spending by 15-20% across the board, targeting inefficiencies, encouraging retirements, rewarding departments under budget, and placing moratoriums on discretionary spending. (Oh, and place all elected and appointed officials back in the social security system and privatize their pensions.)
- Look to eliminate unneeded agencies, restore as many functions as possible back to state and local governments, and welcome input from business leaders on more effective administration.
- Decide ahead of time that we must live within our means. Need more money for a particular program that is working? Then find new revenues that are not hurting the productive and perhaps cut other budgets if needed.
TWO: We must transform our overly-complex federal tax system. We have higher corporate tax rates that many “semi-socialist” nations in Europe. The top 10% pay more than 60% of the taxes and almost half of all American pay little or nothing. Here is a pathway forward:
- Move to a modified flat tax that is revenue neutral from the baseline of a selected year, like 2019 (when the economy was good). Start at 5% and set the cap at 20%. Do the math. There is enough money.
- Over a five-year period, eliminate all personal deductions – yes, ALL deductions, including charity, mortgage interest, etc. If I know I will never pay more than 20%, then I am still incentivized to earn more. If I know that at least 5% will be paid, I will aim to work hard and advance.
- Corporate tax rates must be fair and reasonable and we must stop the cronyism that exempts some elites and places the burdens on the rest of corporate America. Tax only profits after accounting for expenses, R&D, etc., and do not tax dividend, stock, and other capital gains above the lower rate. I recommend 20% as a maximum rate.
THREE: This is the hardest of all: We must stop looking to the federal government to directly solve problems best tackled by more local private-public partnerships. WE DO need the universal ethics of the federal government, but not the ubiquitous administration. For example, an FDA is good, but a government-run meat company would be terrible. Here are some first steps:
- End all loans for education. Encourage grants and scholarships from states and private sources. Continue with scholarships for veterans and particular fields that serve the common good.
- Streamline military and welfare agencies so that the cost of services is reduced and the frontlines are actually helped instead of everything being entangled in a bureaucratic mess.
- NO taxes on personal inheritances. It is immoral to tax again monies already taxed.
The burden for these changes is on us, the American citizens that vote. Will we see the moral problem of spending or capitulate to fatalism and hope we get our share? Our grandchildren need our courage! And if we make these changes, our economy will again be the envy of the world.