Restoring the dream
We will be the first generation to break the implied covenant of leaving our children a better America than the one we inherited. Instead we will hand off a malfunctioning Congress and administration, which has mastered only one capability — spending and promising more than we can afford.
We are galloping toward bankruptcy with a workforce that was once the marvel of the world but is now slipping in education, ranking from the very best to the middle of the pack.
Radical change is needed now to ensure we stop the race to irrelevance. We have two choices: 1) do nothing and “Go Greece” or 2) initiate changes to Advance America Again (AAA). Some thoughts on AAA are outlined to start a dialog.
1. Balanced budgets. The president should inform Congress that he will veto all bills until Congress passes a bill guaranteeing that over the next decade we reach a balanced budget and maintain same in perpetuity.
Once passed, the president will ask for a Constitutional amendment to prevent a future Congress from reneging on this. The only exception would be a war or national calamity.
The Budget Office recently forecast that over the next decade, the cumulative deficit will exceed $1 trillion. Getting to a balanced budget within a decade will involve many painful decisions, which hopefully can be equitably shared by the whole population.
In 2010, the president appointed the Bowles-Simpson Commission (B.S.) which came up with a plan that balanced in a decade. After spending millions of dollars of taxpayers’ money, it was quietly shelved as if it were nothing more than B.S.
The B.S. Commission pointed out the three critical areas of spending that need to be addressed: Social Security, Medicare and defense. Here are some thoughts to develop a plan to share the pain.
1a. Social Security. The Social Security Trust Account is expected to run a deficit in 2021 and by 2033 will have a zero balance. It is imperative that the retirement age be lifted to 70 in yearly increments over the next decade. In addition, the employees’ payroll tax must be restored to its former 6.2 percent and employer contributions increased.
1b. Medicare expenses. As the population ages, increasing medical expenses are having a significant impact on both personal and national budgets.
Obamacare will have an unknown impact on the total cost to society but does afford the opportunity to significantly reduce the growth rate of medical costs. It reduces costs by forcing everyone to buy health insurance, but more importantly, it affords the opportunity for a massive roll-out of the new “personalized medicine” technology.
We can now maintain a database of the DNA of each person and reward doctors more for favorable outcomes as opposed to reimbursing for multiple defensive tests. This technology will drive a large export market for large, personalized medicine systems.
1c. Defense. The national defense budget for 2013 is $531 billion. Associated veterans’ expenses bring the total to $994 billion, out of a total budget of $3.8 trillion or 25 percent of total government spending.
This represents a 50 percent greater expenditure than the sum of the next five largest world spenders combined — China, Russia, the United Kingdom, Japan and France.
We have to reduce our military expenditures from the current 25 percent of the budget (and 4.4 percent of GDP) to the more normal 10 to 12 percent of the budget (or 2 percent of GDP). This will be difficult to do quickly, but we can start by closing some of our 700 bases overseas, stop active recruiting, cancel major new aircraft and ship contracts and have no more wars.
The painful budget disciplines outlined above will only be tolerated and effective in an environment that is growing at a sustainable 3 or 4 percent per year. Some of the budget savings are going to have to be invested in improving the education system.
In particular, the cost of a university education in technology must be dramatically reduced to make it available for a broader segment of the population. MIT and Stanford have already put many of their courses online, and these experimental programs have to be dramatically expanded and eventually certificated.
An educated cadre of technologists can take America to new heights via domination of such new markets as personalized medicine, 3D printing and online education.
Maybe Advance America Again will enable us to get back our AAA credit rating, saving another $3 billion per year in borrowing costs.
Gerard Currie lives in Penn Valley.
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