Tax Cuts And Spending Cuts

With the passage of the Tax Cuts and Jobs Act of 2017, there is an addition $1 Trillion projected to be added to the deficit over the next 10 years.  However, this increase in the deficit should be offset some by a projected increase in economic growth due to the tax breaks.  So, now that the revenue side of the budget has an 8 to 10-year decrease because of the bill, any financial consultant with their head on straight would tell you that there needs to be an equal reduction on the expenses side.  This, however, isn’t how the government seems to work.  Every year since 1974, the budget deficit has averaged at a level of -3.1% according to the Congressional Budget Office.

To put this into perspective, let’s bring it down to a household level.  Let’s imagine that you bring home $50,000 per year (to use an even number).  If your household were using the US Government model, you would spend about $1,550 more each year than you actually bring home.  That is money going onto a credit card, a bank loan or some other form of consumer debt.  Extrapolating this over a period of 39 years (’74-’13), your household would have spent $60,430 more than it made in salary, and that isn’t including the interest that is being accrued on the balance every month.

So, what is the answer?  Cut spending, of course.  But that is where the problem comes in.  When the US Government spends money on something 1 time, the expectation is that they would spend money on that same line item indefinitely.  If you increase a handout to the citizens, it’s almost impossible to rollback those handouts because of the political fallout that would ensue.  Don’t believe me?  Go down to the Social Security office and tell everyone in line that their unemployment checks are about to be cut off and report back on how well that goes.

While cutting spending isn’t very popular, there are many areas that the US Government could cut or reduce spending where the people wouldn’t necessarily “feel” the cut, in fact, some of these cuts don’t even affect the American people at all.  Let’s look at a few areas that the US could reduce spending while continuing to help real people with real needs.

Tomato Research.

In 2017, the US government spent $1.5 Million to fund research on how to make the tomato taste better.  Now, don’t get me wrong here… who doesn’t want a better tasting tomato?  But to the tune of 1.5 million taxpayer funded dollars?  Someone call up John Kerry and see if his wife’s family would be willing to pitch in a couple mil to help their own cause.

Foreign Aid.

This past year, the United States gave away $50.1 billion in aid to other countries.  Former presidents have tried to downplay this number as being “only 1% of our total budget”, but this argument falls short because that is more than 7.5% of the total budget deficit for 2017.  If we start dismissing the “smaller” parts of the budget, then it will never balance.  Anyone who has ever had to do a personal budget knows that when you find yourself $30 in the hole on your monthly budget, you usually chip away small amounts from several places, rather than a lump from one spot.  It hurts less that way.

Now, I know that we cannot eliminate all of that foreign aid for various reasons, but there are plenty of places we can cut back.  In the late 2000’s, we were sending $4.5 billion per year to Pakistan while they continued to mock us with their nuclear program.  We gave Iran $3.4 million this past year and look what they have been doing lately to their own people.

In the days of President Bill Clinton and a balanced budget, we were only spending around $20 Billion in foreign aid.  Those numbers grew quickly in the early 2000’s, due mostly to war, but then continued throughout the 2010’s.  Cutting back foreign aid would be a huge step to righting the sinking ship.

Big Sugar.

The US subsidizes the sugar system in the country to the tune of $1.2 billion dollars per year.  This subsidy actually costs you double because part of the subsidy is government regulations that set a minimum price for sugar in the US, which is about double the average price worldwide.

Improper spending in Medicare. 

The Center for Medicare and Medicaid Services (CMS) released a report in 2016 that showed 11 percent of payments made were incorrect or improper.  That comes out to $4.1 billion dollars in improper payments.

Social Security.

Hold on to your britches for just a second.  Not trying to eliminate it, but revise it.  The current system allows older adults to being drawing (reduced) social security checks at 62 under the early retirement program.  If you wait til 65, you can draw full social security (This will eventually become 67 years of age through a revamp of the system already in progress).  The problem with social security is that when it was implemented in 1935, the average life expectancy of a US adult was 59.1 years of age.  Today, it is 78.8 years of age.

Raising the age of social security eligibility to 70 would save $200 million over the first year and a whopping $7.6 billion over a 5-year period.  It’s time for American’s to work longer and be more responsible for their own retirement funds.

Afghanistan Highways.

Last year we spent $255 billion dollars on building highways in Afghanistan.  I get that they are a war tattered country, but $255 billion is more than 1/3 of the total budget deficit.

Sesame Street.

Yep, you read that right.  We spent $14.8 million to finance international versions of Sesame Street.  14.8 million isn’t that much though right?  Yes. It is way too much.

Walmart Cashiers… in Mexico.

We spent $15 million to train Walmart cashiers in Mexico.  I have 2 issues with this. First and foremost, it’s Mexico.  Second, it’s Walmart.  Isn’t everyone going to self-checkouts these days anyway?

Kenyan Farmers.

And finally, while small in decimal places, this one is a real doozie.  The US Government spent nearly $100,000 to teach Kenyan farmers how to use Facebook.  What the what?  My budget would have a great big ole’ “X” through that little program right there.

 

So, with these 9 examples from a little bit of digging, we have been able to successful eliminate about $290,531,400,000 or 290 Billion dollars in just 1 year.  Extrapolating that out to 10 years (including a greater savings in the Social Security field), we would save a total of $2.9 trillion. So, we just took a 1 trillion dollar addition to the deficit over 10 years due to the tax cuts and successfully turned it around to an extra 1.9 trillion dollar savings over the next 10 years.  And there is plenty more where that came from.

This isn’t rocket science, it’s just simple math.  But it means that some of the extra fat needs to be trimmed off.  None of the proposals above would put any American into poverty, nor would it wouldn’t keep a child in the slums of Detroit from eating dinner.  All it takes is some effort, bipartisanship discussions and hard work on the part of those we elected to run our country.  Rather than talk about who used foul language in a meeting, or who tried to mislead people with medical records, let’s put Washington to work to get rid of all this debt.  Because as you know, the borrower is slave to the lender.

Powers Of The States

Recently, I finished a 3-part series on the powers of government.  This series covered the powers of the legislative branch, the judicial branch, and the executive branch of the federal government.  However, these powers do not include the other powers granted to government by the Constitution.  The 10th Amendment in the Bill of Rights grants one other form of power to a form of government: the individual states.

The 10th Amendment states:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

So, let’s break it down into powers that are not granted to the federal government that would pass along to the state governments:

– Build and maintain roads
– Collect taxes
– Educate inhabitants
– Make and enforce laws
– General welfare expenses
– Ratify Constitutional amendments
– Issue licenses
– Regulate business within the state
– And so on…

Several of the items on that list have been taken over by the federal government, along with others not listed.  Education has only become federally regulated since 1960 and, even more so, with the No Child Left Behind Act and the newer Every Student Succeeds Act.  With these two acts, the federal government has decided that they can do a better job of regulating the education system than the state governments, but the problem is that the Constitution didn’t provide that power to the federal government.

Another pie that the federal government has stuck its proverbial finger into is minimum wage.  It has never been granted the power to regulate wages.  The history of minimum wage is quite interesting, with multiple Supreme Court cases invalidating and later upholding the minimum wage laws in 1941.  Since then, the federal government has taken that power and has run with it, increasing minimum wage as often as it sees fit.  It would be possible to return to a strict Constitutional approach to minimum wage with another Supreme Court decision, but it would likely be very unpopular with a portion of the country who feel that the federal government should tell the states how they should govern.  States still continue to regulate the minimum wage as they see fit, but their minimum wage must be at least the same as the federal minimum, if not higher.

The United States of America was originally created with the idea that the federal government has a limited power and that each individual state would have as much or more power than the federal government.  This is happening in some instances, while in others like education and minimum wage, it is not.  For example, the medical and recreational marijuana laws that some states have passed are bucking the federal law prohibiting the possession and use of marijuana.

James Madison wrote in The Federalist No. 45:

The powers delegated by the proposed Constitution to the Federal Government are few and defined.  Those which are to remain in the State Governments are numerous and indefinite.  The former will be exercised principally on external objects, as war, peace negotiation, and foreign commerce.  The powers reserved to the several states will extend to all the objects, which, in the ordinary course of affairs, concern the lives, liberties and properties of the people, and the internal order, improvement, and prosperity of the state.

Each year, the federal government takes more and more power from the states and gives it to itself.  The only way for this transfer and takeover of power to end is for the states to keep those powers through court action and likely a Supreme Court ruling.  Right now, however, the Supreme Court justices are not largely on the side of states’ rights over federal powers.  Until states insist on their powers remaining within their own control, you can expect the federal government to continue to grab for more and more authority.

Jason – Three Patriots

 

Sources:

http://www.basiclaw.net/Constitution/StatePowers.htm

https://www.infoplease.com/history-and-government/us-government/powers-government

http://www.heritage.org/constitution/#!/amendments/10/essays/163/reserved-powers-of-the-states

http://www.pbs.org/tpt/constitution-usa-peter-sagal/federalism/state-powers/

https://votesmart.org/education/states#.WP5ucVLlQb0

http://expungementinfo.com/exclusive-powers-state-governments/

https://www.law.cornell.edu/constitution/tenth_amendment

Photo Credit: http://www.livebinders.com/play/play?id=1164130

 

Bipartisanship: The Answer To So Many Questions

Last month, the American Health Care Act (AHCA) failed to garner enough Republican support in the House of Representatives to pass their chamber and move on to the Senate.  The failure was partly due to the fact that it had zero support from the Democrats, but also because of differing factions amongst the GOP.  Democrats refuse to replace the Affordable Care Act (ACA), and many of the Republicans didn’t think that the AHCA went far enough in repealing and replacing the ACA.

Almost everyone agrees that the ACA as it stands right now is not the healthcare plan of the future for America.  Those on the left side of the aisle want minor tweaking to keep it fluid, or maybe even more reform to make it more socialistic or universal.  Those on the right side of the aisle want to get rid of much or all of the ACA and start over on healthcare reform.  In reality, the only answer that will work best for all of America is one that lies somewhere in the middle of those two sides.

Throughout America’s history, there are many examples of legislation that were passed with a large majority of bipartisan support.  Social Security and Medicare were enacted with strong bipartisan support.  In 2014, the Workforce Innovation and Opportunity Act (funneling money into skilled worker education) was passed with great bipartisan support in both the House and the Senate.  The problems we are seeing with the US healthcare laws (current and proposed) are because none of them have had any bipartisan support.  When the ACA was passed in 2010, there was no Republican support for the bill in either the House or the Senate.  While there were many reasons for no GOP support (and even some Democrats in the House voted against it), a big reason was that many people didn’t even know what the thousands of pages of legislation and regulations would fully accomplish.  In the words of then House Speaker Nancy Pelosi:

“But we have to pass the bill so that you can find out what is in it – away from the fog of the controversy.”

Fast forward about 7 years and you will find the Republicans trying the same method with the repeal and replacement of the ACA.  They drafted the bill in the House of Representatives behind closed doors with no opposition party input, brought it to the public and planned a vote all within a 2-week period.  There was no Democratic support for the bill.

We now have 2 bills that have only been supported by the party that was/is in power over the 2 chambers of Congress and the presidency.  This leaves the bills very vulnerable the next time there is a power shift in Washington.  If the Republicans are able to force their bill through, the next time the Democrats have control of Congress and have a Democratic President, then they will try to change it to their idea of what is best.  In reality, we need to have both parties sit down at the table and have some give and take.  Compromise never feels great when you give up something that you want, but in the end, getting something that is best for everyone and helps everyone is better than temporary pride.  The Democrats will need to give up some of their more socialistic healthcare ideas and the Republicans will need to give up their opposition to some of the current ACA provisions.

While I don’t pretend to have the answers for what to keep and what to do away with, I know that it’s not going to be an easy road and it’s not going to be a quick road, but it’s a road that we need to travel down to fix a system that isn’t working very well and isn’t headed in a good direction.  Congressmen and women need to stop worrying about all the special interest lobbyist and come together to think about the American people.  Talk with Doctors, talk to nurses and people in the business office of healthcare clinics.  Congress needs to get input from the people who will be carrying out these policies, instead of pretending that they know how to make you healthy, as if they have already gone through med school.  But most importantly, bipartisanship is the only strong answer for the future of healthcare in the United States.

 

Side note: While I personally believe that healthcare reform was something that was never granted to the legislative branch (see here), Congress has already opened that can of worms.  So, I believe the only thing that can be done now is to fix what is currently in place.

Jason – Three Patriots

Powers of Congress

We have discussed several issues lately concerning government and specific roles that it plays in our lives, but all of this has left me thinking, “What is the actual role of government?” So, today I’m starting a mini-series blog on the powers of government.  In order to answer that question, we need to go back to ninth grade Civics class for a lesson.  The United States of America is a constitutional republic (not a democracy as is often misunderstood).  The powers given to the government are given and limited by the Constitution.  So, in order to know what the role of government is, we need to go back to the Constitution to determine which powers it gives and which powers it limits.

The Preamble of the Constitution sets up the powers in:


“…in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity…”


So, in that text, we see 5 points of power:

  1. Establish Justice – law
  2. Insure domestic tranquility – peace in the country’s borders
  3. Defense – protect from invasion
  4. General welfare – well-being of the citizens (notice this does not say social welfare as many want to interpret)
  5. Liberty – ensure freedoms and protect from tyranny

The Constitution then goes on to specify the powers it grants and those that it limits.  Today, I want to talk about the legislative branch of government, which means the House of Representatives and the Senate (aka Congress).  The legislative branch is commonly known to “make the laws.”  Specifically, Article I, Section 8 sets up those powers for Congress (we will discuss the other 2 branches of government in a future post).   From this, we see that Congress gives numerous provisions including collecting taxes, borrowing money, making money, declaring war, etc. (see [4] in sources for full text).  Nowhere in Article I do we find any powers to set up social security, healthcare, and many of the other welfare state functions that Congress has taken upon itself in the past century or so.  Interestingly enough, the Bill of Rights of the Constitution specifically addresses powers that are not explicitly granted to Congress in the Constitution with the Tenth Amendment.


“The powers not delegated to the United States, by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”


Congress has taken the liberty to increase its governance to extremely broad terms.  This infinite interpretation of the congressional powers has increased spending on programs by an alarming amount.  While many of these programs sound like a great program and may even accomplish a lot of good in the country, these social programs implemented by and paid for through congressional action is beyond the powers given to it.  For example, the social programs implemented in the early and middle 20th century accounted for a little over 23 percent of the overall US budget in 1962.  Today, that number has grown well above 63 percent of the overall budget (63.3 percent when last recorded in 2011 – with the increase in the welfare system under President Obama, that number has to be significantly higher now).

What this all boils down to is that issues related to welfare, healthcare, and other social services are not powers given to Congress but, instead, are powers that they took upon themselves to make.  These assumed powers are costing the taxpayers trillions of dollars each year, and they are going largely unchecked.

I know of many noble, worthy causes and programs that have been funded by the government’s increasing focus on social programs.  While I will not go into specifics on individual programs, many of them will be completely sufficient with a reduction in budget or even the elimination of federal funding.  A majority of them are 501(c) non-profit organizations that have the ability to attract donations with tax-deductions.  I believe that the American people have a desire to fund these types organizations and, when presented with a need, would be more than willing to step up and fill that need.  Telethons across the country have reached goals of millions of dollars in a single day.  Present the American people with a just cause, and watch it obtain funding for the next year or more every time.

In the meantime, let’s get government back to what it was originally intended to do and away from becoming what our Founding Fathers never envisioned.

Jason – Three Patriots

 

SOURCES:

[1] https://constitutioncenter.org/interactive-constitution/preamble/giving-meaning-to-the-preamble-by-erwin-chemerinsky/interp/37

[2] https://patriotpost.us/commentary/11449

[3] https://www.usconstitution.net/xconst_A1Sec8.html

[4] http://www.independent.org/newsroom/article.asp?id=2085