We've covered a lot of ground these past few months. Discussions with some of you suggest it's time to put it all together and show what a real Grand Bargain looks like.
The most important discussion has focused on government spending which, at 40% of GDP, is way too high.
The second-most important discussion has focused on the national debt which, when including the money we owe ourselves, is more than 110% of GDP.
The third-most important discussion is the measure of GDP itself; a tainted measure since it includes government spending making our Nanny-State programs look good.
The fourth-most important discussion is entitlements since they lead federal government spending at 62%. These are the well-known federal Social Security ($773 billion), Medicare/Medicaid ($732 billion) and Welfare ($411 billion) programs. They also include pensions for government and military employees.
Overall, Medicaid ($390 billion) and Welfare ($700 billion) costs include state expenditures. While these shouldn't really be called entitlements since they aren't funded directly like Social Security, Medicare and government pensions, I label them as such out of convention. Obamacare will add another $150 billion/year according to the CBO.
Overall, Medicaid ($390 billion) and Welfare ($700 billion) costs include state expenditures. While these shouldn't really be called entitlements since they aren't funded directly like Social Security, Medicare and government pensions, I label them as such out of convention. Obamacare will add another $150 billion/year according to the CBO.
The fifth-most important discussion is public education since it leads state and local government spending at 26%. This number grows to more than 70% when teacher pensions, teacher retirement health benefits, state/local board of education, state/local school construction bonds, retirement bonds and federal education spending are rolled in to what the local school districts spend.
The next most important discussion is the notion of a General Fund approach to government finance.
Part of the problem here is that as some of us have forgotten the proper role of government, politicians are able to freely pander for votes; they promise wonderful new programs that won't cost a dime because they'll be paid for by someone else. This fallacy of fiscally liberal thought, of course, is that we do pay for these things but we pay with a different check.
Another problem is that it leads to bizarre and never-ending taxation schemes; sin taxes, fuel taxes, payroll taxes, corporate taxes, estate taxes, income taxes, tolls, capital gains taxes, fuel taxes, sales taxes, fees (for licenses, registrations, travel, hotel occupancy, energy, communication, etc.) and property taxes. In short, we're taxed when we earn, we're taxed when we spend and we're taxed just for owning stuff. Oh yeah, we're also taxed when we die with an inheritance tax.
Yet another problem is that this leaves to door open for yet more political pandering in the form of taxation trickery; tax deductions, tax credits, tax deferrals, tax loopholes, tax abatement, tax amnesties and a personal favorite, government investment of tax revenue in private industry; a trap I nearly fell in with my posts on Regulation and Solar Power. I have repented.
Then, the ultimate in pandering, the government bailout of private industry because legislators are afraid to truly regulate their benefactors.
The Republicans say they want to cut spending and taxes to grow the economy but the Republican-led house budget does neither. The Democrats want to increase spending without bound and give our money away to those who have been programmed (by the Democrats; FDR & LBJ) to expect a free ride. I give the Democrats credit for being more honest about it but I still object. They haven't passed a budget in years and they appear to like it; sucking us dry as we move from one crisis to the next.
The final important discussion is government employee giveaways: public employee pensions and retiree health benefits. These happen at all three levels of government; federal, state and local. We already have Social Security and Medicare, why would we need to duplicate these programs? It's because Social Security and Medicare, while good enough for us are not good enough for the government elite.
OK, so those are the big issues. How do we fix them?
The solution is not easy if it is to be fair. It will take time to implement without causing chaos and ruining people's lives by taking away the government teats too abruptly. It has to have something for both the liberals and the conservatives to like so they'll make it happen. It has to make sense.
Right-Sizing Government
First, we cut the roles of government back to Justice, State/Intelligence, Defense and Treasury; pretty much what Lincoln had. The education, interior/parks, transportation (with targeted funding) and local functions are assumed by Treasury except for air traffic control and the FAA going to Defense (with targeted funding).
At the federal level, by also reducing defense spending back to the levels of 2001, and ending the ground wars in the middle east and closing bases in Japan and Germany, this reduces the cost of government to about 3.5% ($600 billion of $15.1 trillion GDP) of GDP from 23% ($3.5 trillion). This also increases the unemployment rate back to about 10%; a fair trade.
At the state level, this reduces the cost of government to about 1.6% of state GDP ($3.96 billion of $250 billion Connecticut GDP) from 8.8% ($21.5 billion). This will also increase unemployment by a small amount (nationally).
At the town level, by also restructuring public education as I describe in my post on the subject, this reduces the cost of government to about 4.2% of city GDP ($51 million of $1.2 billion Shelton GDP) from 9.4% ($111 million). This will also increase unemployment by a small amount (nationally).
The result is that government spending drops from 40% to 9.3% of GDP with taxpayers pocketing the difference. This puts about $4.5 trillion back in the hands of taxpayers...every year.
Targeted Funding
As I discussed in my post on this subject, we fund some services by taxing those who use them. If the users are unwilling to foot the bill, the service goes away. Simple.
This applies most readily to transportation of all sorts but it also infers a flat tax structure for services enjoyed equally by all.
Cut up the Credit Cards
Now that we've reduced government to the essentials and streamlined the funding, we have much more income than needed so we take the scissors to the credit cards; no more deficit spending.
If it absolutely makes sense and there's a return to be had and, say, 90% of the electorate votes for it, fine. Otherwise, no. This makes it possible to rebuild after disaster strikes, for example; a purpose-defined tax can be levied to repay the debt incurred to rebuild an airport or a road (with user fees increased to pay back the loan from government). It also makes it possible but difficult to wage war, if attacked.
On disasters, private insurance is assumed to cover private property; no more government-backed flood or other insurance except for FDIC. FDIC must be offered but only with strict regulation of commercial banks as I suggest in my post on regulations.
No more bailouts; break up the too-big-to-fail banks, disband Fannie Mae & Freddie Mac and let the car companies fend for themselves. Investors and workers have to start paying attention and head off these disasters before they get out of control.
Divide and Conquer
The tall pole in the tent is entitlement spending. Into this group falls Social Security, Medicare, Medicaid and Welfare programs as well as public employee benefits (including teachers, police, firemen, etc.).
To start, we'll divide the entitlements by payer;
We have to take advantage of the birthrate lull that arrives in 20 years to fix this thing. These entitlement schemes were born when we allowed population to grow boundlessly; always more payers than beneficiaries. That all changed in the 60's and exposed the design flaw the social engineers had made.
The graph below shows the rates through 2005 (add 65 years to the baseline to see where we are now and why this is so scary).
And the graph below shows more recent data.
I propose that we use the excess revenue gained by reducing the scope of government to finance entitlements for the next 20 years then slowly cut the safety net, tax rates and all taxation trickery over the following 20 years. Nobody gets hurt, people get a 20-year warning of what's coming and the country regains sound financial footing for our grandchildren.
Here's how we can do it.
Federal
Both the White House and the House of Representatives project revenue this year (2013) of $2.7 trillion.
Here is how the President's 2013 budget would change for the Grand Bargain. The asterisks show the items that must change to reflect the new paradigm.
Congress costs about $4.5 billion and the Supreme Court costs are a great deal smaller (not in budget) so the grand total is about $600 billion.
So, after subtracting the $600 billion cost (in today's dollars) of the optimized government, we have $2.1 trillion to pay entitlements and also to pay off the tremendous debt.
In 2032, we start reducing taxes and tax tricks (current value of $1.1 trillion) by an overall 2% per year. This means reducing tricks by about $22 billion/year (to increase federal revenue) and taxes by about $44 billion (to reduce federal revenue by twice as much). This way taxpayers gain twice what they lose by eliminating tax trickery so nobody gets screwed.
We also shell out $1.6 trillion for Social Security and Medicare for 20 years then slowly drop what we pay as dictated by the birthrate demographic as we nearly finish paying off the debt.
Bringing the debt down to $1 trillion actually means a $4 trillion surplus since, of the $16 trillion debt, we owe ourselves $5 trillion (by congressional appropriation from the entitlement trust funds which now contain only IOU's). This will finance entitlements for any of the folks who are now 45 or older who live beyond 85 years. It also smooths the (average 15%) bump in the demographic over the first 20 years by paying ourselves back first.
The idea is to keep the promise of these programs for those 45 and up. Those folks will continue to pay FICA as will their employers (7.65% each to fund Social Security and Medicare...aka Payroll Tax); these are the maximum earning years for most of us. For those below 45, they will no longer pay FICA although their employers will so the net program loss of revenue will be small since these are the lesser earning years. The average 44-year old earner (salary average in US is $62,000) can save well over $300,000 in 20 years starting with 7.65% of pay in a safe 3% government bond along with another 10% of wages; and congress can't (mis)appropriate it for wealth redistribution purposes.
The point is that this will pay the same as the current Social Security payout ($1,250/month including $50/month for a catastrophic health insurance policy) over 20 years (optimistic length of retirement) and still have $119,000 left; and it doesn't count what that person may have already saved.
A catastrophic health insurance can be had to prevent financial ruin (private alternative to Medicare). Using this link, I got a plan for $50/month.
A 22-year old has much more potential; starting at minimum wage and working up to a $62,000 salary (or more with college degree) will net more than a half-million dollars toward retirement.
So, by 2052, the debt is gone, entitlements are done and we are taking care of ourselves.
After 2052, taxes and tax trickery can start dropping even faster until they are gone after just a few more years. We could also build a small surplus in this time.
No chaos, no pain, optimum government, no debt. All federal taxes and tax tricks can be replaced with a flat tax of 3.5%; everyone pays, no exceptions. Fair as fair can be. Balanced too ;-)
State
Since Connecticut is one of the worst-managed states in the union, it serves as a good example of how my plan works at the state level.
Connecticut's state revenue is expected to be $23.1 billion in 2013. However, the state receives about $3.5 billion in federal grants and that will not happen with my plan so the net revenue is really $19.6 billion.
The cost of the streamlined government of Justice, State, Defense and Treasury is $3.96 billion including targeted funding of transportation and the $2.8 billion cost of the state university and research system. I have removed all funding for K-12 (shown as the General Fund on page A44 of the state budget) as this would be paid for locally with no state or federal money needed by using my Public Education plan.
So here's the revised state budget:
This leaves $15.64 billion to pay for Medicaid, Welfare, state employee and teachers retirement and health benefits. Same deal as for the federal version; everyone 45 and up is covered and will still pay their current share into the retirement 'fund'. The rest of the state's employees and teachers will save for themselves as described and shown under the federal (self-serve) plan above.
The state debt is about $42 billion but that includes unfunded pension liabilities of $23 billion. To me, this whole idea of unfunded liabilities is an overly polite misnomer. What it really means is that our state government has spent or otherwise mismanaged the money that should have been socked away on a pay-as-you-go basis; much like Congress' raiding of the federal trust funds. The real debt is more like $20 billion and I'll treat the unfunded liabilities of the pension funds the same as the other state entitlements.
Nationally, Medicaid cost $390 billion in 2010 and Welfare cost $700 billion in 2012. Connecticut should pay it's share by population. Since Connecticut has 3.5 million people, we get 3.5/311 or 1.125% of the burden. This amounts to $12.26 billion/year, more than the $10.9 billion we actually spend on welfare and healthcare but that is our lot in life as one of the richest states. I suppose we'd have to give the difference of $1.36 billion to the poorer states to keep the socialist promise alive for the duration of this plan. It sounds like a lot but left unchecked, it would be a lot worse; we currently pay about $50 billion/year in federal taxes but only get $3.5 billion back. The spending in Washington will double that in 10 years if we don't change course.
We also pay out $3.2 billion/year in state employee benefits but the good news is that we have $20.5 billion in the retirement and health funds for teachers and state employees (see pages A-26 and A-26). This money can be used to wipe away the state's debt and $2 billion yearly debt payments in a single stroke! By this measure at least, Connecticut is better-managed than the federal government.
So, our total entitlement nut is $15.46 billion ($12.26 billion+$3.2 billion) and the cost of government is $3.96 billion for a total of $19.42 billion. This means we can be living within our means and debt-free with a $180 million annual surplus right out of the gate!
As with the case of federal spending, tax trickery and taxes (of all kinds) start reducing after 20 years by 2% overall every year for 20 more years until the 45-and-up crowd has been laid to rest. Again, the idea is that taxpayers reap more reward from tax reduction than they lose from curtailing tax tricks that had worked in their favor.
After that, they can reduce much more quickly until the $13 billion in revenue equals the cost of optimized government; $3.96 billion in today's dollars. At that point, we should have a surplus of more than a few billion dollars and an open door to a scheme of targeted funding and a flat tax.
Post-Plan Welfare
The prison system costs $750 million for 17,000 inmates with a workforce of 7,000. This seems exorbitantly high to me in terms of both manpower and cost. It seems to me that 1 worker per 10 inmates is plenty and this would reduce the cost by $108 million. I live a comfortable, middle-class life on about $120/day. We're paying more than $93/day for inmates? I should think that $30/day would suffice. This would reduce cost by another $96 million for a total of $649 million. That's what I put in the budget.
The state University system costs $2.8 billion and has a current enrollment of 30,000 at UCONN and about 36,000 at the other four regional facilities. This means that taxpayers are paying a subsidy of $42,420 per student! This much on top of the $11,000 to $40,000 paid by students at UCONN or $4,000 to $11,000 at the regional campuses. This seems absurd so I suggest reducing the subsidy to $1 billion and holding the feet of the administrators to the fire. That's what I put in the budget.
Poor people get two more generations to get their acts together; after that, they're on their own like us.
Hopefully, we kick the illegal immigrants out because I have allocated exactly zero for them. Here’s the thing: taxpayers shell out more than $6 trillion/year for government when federal, state and local levels are added up. Subtracting out Social Security and Medicare, which illegal, undocumented immigrants (hopefully) can’t get without a Social Security number, leaves over $4.4 trillion.
A government costing $4.4 trillion divided among a population of 311 million is $14,148 per year each. The 11 million illegal immigrants are costing us $155.6 billion/year.
No chaos, no pain, optimum government, no debt. All state taxes and tax tricks can be replaced with a flat tax of 1.6%; everyone pays, no exceptions. Fair as fair can be.
Local
Since I used poorly-managed examples for the federal and state government reforms, I've decided it would be best to use a well-managed example for local government since, in a practical world, local government should have the highest cost as a percentage of GDP (because of education). I'll use my city of Shelton, CT.
The city takes in about $111 million in revenue but gets about $7 million from the state which won't happen with this plan. So, the net revenue is $104 million.
The city's biggest expense, by far, is education at $63.7 million for 5,137 students. Using my plan for Public Education reform, this becomes $26 million.
The rest of town government, excluding debt service (which the Mayor called to tell me will be gone in 10 years) and revenue from local (non-property tax) sources costs $35 million.
The grand total is $51 million for a population of roughly 40,000 with 15,382 taxpayers and a city GDP of $1.2 billion. A flat tax of 4.2% should cover it nicely; this works out to an average tax of $3,315.
Summary
As Washington and the states continue to apply band-aids and political posturing to the problems and solving nothing, this is a real solution. They constantly seek to expand government when we really need to redefine its role for our society.
Roles defined; Justice, State, Treasury and Defense.
Government spending reduced from 40% to 9.3% of GDP but still serving their required roles.
Entitlements fulfilled for all those aged 45 and up. Self-entitlement for everyone else and a plan to do it.
Publicly funded education at a price we can afford that still delivers the goods in the classroom.
Targeted funding of services by those who use them. A flat tax for services that benefit all equally. In the vernacular: a fair and balanced approach. No more us versus them, just us.
No debt, no deficit spending, no elite treatment for government workers.
No pain, no chaos and a steady path to a government the founding fathers would approve.
Political pandering put in check by raising the threshold for incurring new debt.
Comments welcome!
<a href="http://www.conservativesforum.com">Conservative's Forum</a> - Conservative news and discussion Forum.
Then, the ultimate in pandering, the government bailout of private industry because legislators are afraid to truly regulate their benefactors.
The Republicans say they want to cut spending and taxes to grow the economy but the Republican-led house budget does neither. The Democrats want to increase spending without bound and give our money away to those who have been programmed (by the Democrats; FDR & LBJ) to expect a free ride. I give the Democrats credit for being more honest about it but I still object. They haven't passed a budget in years and they appear to like it; sucking us dry as we move from one crisis to the next.
The final important discussion is government employee giveaways: public employee pensions and retiree health benefits. These happen at all three levels of government; federal, state and local. We already have Social Security and Medicare, why would we need to duplicate these programs? It's because Social Security and Medicare, while good enough for us are not good enough for the government elite.
OK, so those are the big issues. How do we fix them?
The solution is not easy if it is to be fair. It will take time to implement without causing chaos and ruining people's lives by taking away the government teats too abruptly. It has to have something for both the liberals and the conservatives to like so they'll make it happen. It has to make sense.
Right-Sizing Government
First, we cut the roles of government back to Justice, State/Intelligence, Defense and Treasury; pretty much what Lincoln had. The education, interior/parks, transportation (with targeted funding) and local functions are assumed by Treasury except for air traffic control and the FAA going to Defense (with targeted funding).
At the federal level, by also reducing defense spending back to the levels of 2001, and ending the ground wars in the middle east and closing bases in Japan and Germany, this reduces the cost of government to about 3.5% ($600 billion of $15.1 trillion GDP) of GDP from 23% ($3.5 trillion). This also increases the unemployment rate back to about 10%; a fair trade.
At the state level, this reduces the cost of government to about 1.6% of state GDP ($3.96 billion of $250 billion Connecticut GDP) from 8.8% ($21.5 billion). This will also increase unemployment by a small amount (nationally).
At the town level, by also restructuring public education as I describe in my post on the subject, this reduces the cost of government to about 4.2% of city GDP ($51 million of $1.2 billion Shelton GDP) from 9.4% ($111 million). This will also increase unemployment by a small amount (nationally).
The result is that government spending drops from 40% to 9.3% of GDP with taxpayers pocketing the difference. This puts about $4.5 trillion back in the hands of taxpayers...every year.
Targeted Funding
As I discussed in my post on this subject, we fund some services by taxing those who use them. If the users are unwilling to foot the bill, the service goes away. Simple.
This applies most readily to transportation of all sorts but it also infers a flat tax structure for services enjoyed equally by all.
Cut up the Credit Cards
Now that we've reduced government to the essentials and streamlined the funding, we have much more income than needed so we take the scissors to the credit cards; no more deficit spending.
If it absolutely makes sense and there's a return to be had and, say, 90% of the electorate votes for it, fine. Otherwise, no. This makes it possible to rebuild after disaster strikes, for example; a purpose-defined tax can be levied to repay the debt incurred to rebuild an airport or a road (with user fees increased to pay back the loan from government). It also makes it possible but difficult to wage war, if attacked.
On disasters, private insurance is assumed to cover private property; no more government-backed flood or other insurance except for FDIC. FDIC must be offered but only with strict regulation of commercial banks as I suggest in my post on regulations.
No more bailouts; break up the too-big-to-fail banks, disband Fannie Mae & Freddie Mac and let the car companies fend for themselves. Investors and workers have to start paying attention and head off these disasters before they get out of control.
Divide and Conquer
The tall pole in the tent is entitlement spending. Into this group falls Social Security, Medicare, Medicaid and Welfare programs as well as public employee benefits (including teachers, police, firemen, etc.).
To start, we'll divide the entitlements by payer;
- The federal government takes Social Security, Medicare and federal employee benefits.
- The states take Medicaid, Welfare and state employee benefits and teachers benefits.
- The cities/towns take town employee benefits.
We have to take advantage of the birthrate lull that arrives in 20 years to fix this thing. These entitlement schemes were born when we allowed population to grow boundlessly; always more payers than beneficiaries. That all changed in the 60's and exposed the design flaw the social engineers had made.
The graph below shows the rates through 2005 (add 65 years to the baseline to see where we are now and why this is so scary).
 |
| US Birthrates 1930-2005 |
 |
| US Birthrates 2005-2012 |
Here's how we can do it.
Federal
Both the White House and the House of Representatives project revenue this year (2013) of $2.7 trillion.
Here is how the President's 2013 budget would change for the Grand Bargain. The asterisks show the items that must change to reflect the new paradigm.
 |
| Grand Bargain Federal Budget |
Congress costs about $4.5 billion and the Supreme Court costs are a great deal smaller (not in budget) so the grand total is about $600 billion.
So, after subtracting the $600 billion cost (in today's dollars) of the optimized government, we have $2.1 trillion to pay entitlements and also to pay off the tremendous debt.
 |
| Federal Spending through 2052 |
We also shell out $1.6 trillion for Social Security and Medicare for 20 years then slowly drop what we pay as dictated by the birthrate demographic as we nearly finish paying off the debt.
Bringing the debt down to $1 trillion actually means a $4 trillion surplus since, of the $16 trillion debt, we owe ourselves $5 trillion (by congressional appropriation from the entitlement trust funds which now contain only IOU's). This will finance entitlements for any of the folks who are now 45 or older who live beyond 85 years. It also smooths the (average 15%) bump in the demographic over the first 20 years by paying ourselves back first.
The idea is to keep the promise of these programs for those 45 and up. Those folks will continue to pay FICA as will their employers (7.65% each to fund Social Security and Medicare...aka Payroll Tax); these are the maximum earning years for most of us. For those below 45, they will no longer pay FICA although their employers will so the net program loss of revenue will be small since these are the lesser earning years. The average 44-year old earner (salary average in US is $62,000) can save well over $300,000 in 20 years starting with 7.65% of pay in a safe 3% government bond along with another 10% of wages; and congress can't (mis)appropriate it for wealth redistribution purposes.
 |
| Saving 17.65% of $62,000 in a 3% Bond for 20 Years |
A catastrophic health insurance can be had to prevent financial ruin (private alternative to Medicare). Using this link, I got a plan for $50/month.
A 22-year old has much more potential; starting at minimum wage and working up to a $62,000 salary (or more with college degree) will net more than a half-million dollars toward retirement.
So, by 2052, the debt is gone, entitlements are done and we are taking care of ourselves.
After 2052, taxes and tax trickery can start dropping even faster until they are gone after just a few more years. We could also build a small surplus in this time.
No chaos, no pain, optimum government, no debt. All federal taxes and tax tricks can be replaced with a flat tax of 3.5%; everyone pays, no exceptions. Fair as fair can be. Balanced too ;-)
State
Since Connecticut is one of the worst-managed states in the union, it serves as a good example of how my plan works at the state level.
Connecticut's state revenue is expected to be $23.1 billion in 2013. However, the state receives about $3.5 billion in federal grants and that will not happen with my plan so the net revenue is really $19.6 billion.
The cost of the streamlined government of Justice, State, Defense and Treasury is $3.96 billion including targeted funding of transportation and the $2.8 billion cost of the state university and research system. I have removed all funding for K-12 (shown as the General Fund on page A44 of the state budget) as this would be paid for locally with no state or federal money needed by using my Public Education plan.
So here's the revised state budget:
 |
| State Budget Before & After Plan |
This leaves $15.64 billion to pay for Medicaid, Welfare, state employee and teachers retirement and health benefits. Same deal as for the federal version; everyone 45 and up is covered and will still pay their current share into the retirement 'fund'. The rest of the state's employees and teachers will save for themselves as described and shown under the federal (self-serve) plan above.
The state debt is about $42 billion but that includes unfunded pension liabilities of $23 billion. To me, this whole idea of unfunded liabilities is an overly polite misnomer. What it really means is that our state government has spent or otherwise mismanaged the money that should have been socked away on a pay-as-you-go basis; much like Congress' raiding of the federal trust funds. The real debt is more like $20 billion and I'll treat the unfunded liabilities of the pension funds the same as the other state entitlements.
Nationally, Medicaid cost $390 billion in 2010 and Welfare cost $700 billion in 2012. Connecticut should pay it's share by population. Since Connecticut has 3.5 million people, we get 3.5/311 or 1.125% of the burden. This amounts to $12.26 billion/year, more than the $10.9 billion we actually spend on welfare and healthcare but that is our lot in life as one of the richest states. I suppose we'd have to give the difference of $1.36 billion to the poorer states to keep the socialist promise alive for the duration of this plan. It sounds like a lot but left unchecked, it would be a lot worse; we currently pay about $50 billion/year in federal taxes but only get $3.5 billion back. The spending in Washington will double that in 10 years if we don't change course.
We also pay out $3.2 billion/year in state employee benefits but the good news is that we have $20.5 billion in the retirement and health funds for teachers and state employees (see pages A-26 and A-26). This money can be used to wipe away the state's debt and $2 billion yearly debt payments in a single stroke! By this measure at least, Connecticut is better-managed than the federal government.
So, our total entitlement nut is $15.46 billion ($12.26 billion+$3.2 billion) and the cost of government is $3.96 billion for a total of $19.42 billion. This means we can be living within our means and debt-free with a $180 million annual surplus right out of the gate!
 |
| Connecticut State Spending through 2052 |
After that, they can reduce much more quickly until the $13 billion in revenue equals the cost of optimized government; $3.96 billion in today's dollars. At that point, we should have a surplus of more than a few billion dollars and an open door to a scheme of targeted funding and a flat tax.
Post-Plan Welfare
The prison system costs $750 million for 17,000 inmates with a workforce of 7,000. This seems exorbitantly high to me in terms of both manpower and cost. It seems to me that 1 worker per 10 inmates is plenty and this would reduce the cost by $108 million. I live a comfortable, middle-class life on about $120/day. We're paying more than $93/day for inmates? I should think that $30/day would suffice. This would reduce cost by another $96 million for a total of $649 million. That's what I put in the budget.
The state University system costs $2.8 billion and has a current enrollment of 30,000 at UCONN and about 36,000 at the other four regional facilities. This means that taxpayers are paying a subsidy of $42,420 per student! This much on top of the $11,000 to $40,000 paid by students at UCONN or $4,000 to $11,000 at the regional campuses. This seems absurd so I suggest reducing the subsidy to $1 billion and holding the feet of the administrators to the fire. That's what I put in the budget.
Poor people get two more generations to get their acts together; after that, they're on their own like us.
Hopefully, we kick the illegal immigrants out because I have allocated exactly zero for them. Here’s the thing: taxpayers shell out more than $6 trillion/year for government when federal, state and local levels are added up. Subtracting out Social Security and Medicare, which illegal, undocumented immigrants (hopefully) can’t get without a Social Security number, leaves over $4.4 trillion.
A government costing $4.4 trillion divided among a population of 311 million is $14,148 per year each. The 11 million illegal immigrants are costing us $155.6 billion/year.
No chaos, no pain, optimum government, no debt. All state taxes and tax tricks can be replaced with a flat tax of 1.6%; everyone pays, no exceptions. Fair as fair can be.
Local
Since I used poorly-managed examples for the federal and state government reforms, I've decided it would be best to use a well-managed example for local government since, in a practical world, local government should have the highest cost as a percentage of GDP (because of education). I'll use my city of Shelton, CT.
The city takes in about $111 million in revenue but gets about $7 million from the state which won't happen with this plan. So, the net revenue is $104 million.
The city's biggest expense, by far, is education at $63.7 million for 5,137 students. Using my plan for Public Education reform, this becomes $26 million.
The rest of town government, excluding debt service (which the Mayor called to tell me will be gone in 10 years) and revenue from local (non-property tax) sources costs $35 million.
The grand total is $51 million for a population of roughly 40,000 with 15,382 taxpayers and a city GDP of $1.2 billion. A flat tax of 4.2% should cover it nicely; this works out to an average tax of $3,315.
Summary
As Washington and the states continue to apply band-aids and political posturing to the problems and solving nothing, this is a real solution. They constantly seek to expand government when we really need to redefine its role for our society.
Roles defined; Justice, State, Treasury and Defense.
Government spending reduced from 40% to 9.3% of GDP but still serving their required roles.
Entitlements fulfilled for all those aged 45 and up. Self-entitlement for everyone else and a plan to do it.
Publicly funded education at a price we can afford that still delivers the goods in the classroom.
Targeted funding of services by those who use them. A flat tax for services that benefit all equally. In the vernacular: a fair and balanced approach. No more us versus them, just us.
No debt, no deficit spending, no elite treatment for government workers.
No pain, no chaos and a steady path to a government the founding fathers would approve.
Political pandering put in check by raising the threshold for incurring new debt.
Comments welcome!
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The flaw that I see in your plan, with as much as I have read so far, is that while you go to great lengths to explain most of your financial ideas, you fall to explain how you would go about "ending the land wars in the Middle East". It seems to me that this is a crucial part of your fiscal plan to free up funding, yet you offer no suggestions on how to do this. First, are you a military man? Do you understand that there are only 2 ways to actually end this? One is to removed all the sanctions and limitations placed on our soldiers, marines, and airmen, and allow them to do the job they have trained for and completely eliminate the enemy! Unfortunately this solution will cause collateral damage, but that is the cost of truly winning this war since the bureaucrats have allowed to devolve into the mess it has become (details in another discussion if you so desire). The other option is to pull out without winning and risk the growth of ISIS and terrorism all over the world; or you could hope that by removing our presence they would rejoice in their victory and go on about their day without continued attacks (Good Luck with that!). So, the only way to truly end the land war in the middle east is to drive forward, QUICKLY and HARSHLY, with all of our military might and crush the enemy completely. Are you willing to do that? Unless you are, which bureaucrats for the last 20 years have not been, this region will continue to fester and bleed jihadists and war for decades.
ReplyDeleteI never served in the military but I have read Von clausewitz. Having said that please read my letter clean up aisle 6
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