Saturday, December 6, 2008

Balanced Budget Amendment terminal?

How to have a realistic chance of this ever coming to fruition?How to do it without it being a watered down version with loopholes and exceptions throughout?As you know,they came close to passing a version in 1995.There have been countless studies done.States have their versions with some success stories.

One favorite approach is to equate it with our budget at home.Not very practical when we don't have revenue raising options(raising taxes,printing money).We can sell assets,cancel cable tv or make a career change to bank robbery.None are very good or permanent.Congress could pass an airtight,no exceptions bill(even war).However,re-election and the short term pain felt by taxpayers prohibits that.

The SSA currently projects Medicare to be insolvent in 2019 and deficits have begun already.They project an increase from 1.45% to 3.22% as a minimum for balancing in 75 years.SS is slated to die in 2041 and needs an increase from 6.2% to 7.05%.Don't forget the employer matches.I'll not begin to tell you I'm an economist smarter than everyone else.Can't see the trees for the forest comes to mind.Lots of smart number crunchers can decipher things in black and white but can't account for the variables.

They always tell you at home to pay yourself first meaning paycheck money goes into savings before you pay any bills.Not possible with no rainy day fund currently at the Federal level.Isn't that why they made the Constitution amendable?I propose that since taxpayer receipts are our money and Congress represents us,we should begin the process to demand this.

IRS intake should first be reduced by the amount deemed necessary for 3 things-debt reduction,ss and Medicare.Although many are not fans of any entitlement programs,these are really not negotiable at this point.With those now on the front end of the budget,you can take the fight back where it belongs with the leftovers.Sure,Congress can raise taxes for pork spending,wars will happen,etc.In 2007,SS and Medicaid amounted to 38% of Federal revenues or 7% of the GDP.

My view is that as costs continue to escalate,these items most vital to the majority of Americans will stay solvent in this manner.Accountability for a deficit spending will be far greater for politicians.This should reduce earmarks.Invariably,the pain must be shouldered by the taxpayers for paying off the debt,completely funding ss and Medicare and living within a balanced budget every year.Just like doing without cable tv at home,we'll have to do without massive infrastructure projects(i.e.Obama 2009),space exploration,or things of that nature.In the meantime,allowing the free market economy to recover will lead to long term growth and raising the GDP.You must have both if America is to keep it's place for another 232 years.More to come...

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