Cut Spending
The 2010 bipartisan Simpson-Bowles report (Sept. 2010) is a good example of how the government could cut spending to reduce debt. The report proposed balancing the budget through a mix of spending cuts and tax reform. Congress didn’t adopt the complete plan, but the government did implement parts of it with some success. The problem our congress is 2-fold: For Senators and House members to get re-elected (remember term limits that has been kicked down the road since identified by President George Washington) they feel that legislation must be included that benefits those states or districts so they add spending to benefit those individuals but is not related to the initial bill.
Any proposed bill should be required to stand on it’s own merits!
Note
A 2015 report from the Committee for a Responsible Federal Budget indicated that although a piecemeal approach reduced debt, full-fledged adoption of the Simpson-Bowles plan theoretically might have produced a significantly lower debt-to-GDP ratio.
Raise Taxes
Raising taxes can generate revenue that the government can use to pay down debt as well as invest in programs that support the economy. But it can cut into tax revenue and hurt the economy if the government raises taxes too high. Finding the correct balance is expressed by a concept known as the “Laffer Curve.”
What is the Laffer Curve
Arthur Laffer presented his ideas in 1974 to staff members of President Gerald Ford’s administration. Most believed at the time that an increase in tax rates would increase tax revenue.
Laffer countered that taking more money from a business in the form of taxes means the less money the business will be willing to invest. A business will find ways to protect its capital from taxation or to relocate all or a part of its operations overseas. Workers lose the incentive to work harder when they see a greater portion of their paychecks taken for taxation.
Laffer argued that this means less total revenue as tax rates rise and that the economic effects of reducing incentives to work and invest by raising tax rates would damage an economy.
Laffer’s findings influenced President Ronald Reagan’s economic policy known as Reaganomics and it resulted in one of the biggest tax cuts in history. Yet annual federal government current tax receipts still grew during Reagan’s time in office. Total federal tax revenue was $517 billion in 1980. Total federal tax revenue had nearly doubled to $909 billion by 1988. Keeping corporations in this country by reducing their tax will increase job growth.
Reaganomics defined:
Marginal tax rates decreased in the economic policy under President Reagan. Tax revenues increased, inflation decreased, and the unemployment rate fell.
Grow the Economy Faster
Increasing the GDP has a twofold benefit: It generates extra revenue to pay down debt, and it reduces the debt-to-GDP ratio if GDP growth outpaces debt growth.
Driving economic growth is one way to reduce the national debt, but Congress tends to disagree on how to create that growth. Most Democrats push increased spending, while most Republicans champion lower taxes. However, unlimited growth is an unrealistic goal, so growth alone can’t solve the federal debt.
Shift Spending
According to a report from the Political Economy Research Institute at the University of Massachusetts, Amherst, $1 billion in education and mass transit spending could produce more than twice the jobs created by military spending. Job creation can help boost the GDP, which can help lower the nation’s debt-to-GDP ratio in many cases.
Congress could shift spending from defense to job-creation areas like infrastructure and education. Almost 15% of government spending goes to the military. But past studies indicate that money spent on the military is less effective in creating jobs than money spent in other areas. That might be BUT remember Federal Government exists to protect the people so the term “Walk softly but carry a big stick” means that this country must maintain a strong military with cutting-edge equipment! With that said by creating companies in this country and stop shipping requirements to overseas locations and using education to train individuals in the skills not available in this country seems to me will result in a more prosperous economy.
Education Versus Employment
Education costs are better managed and at less cost at the State and local school districts rather than being controlled by the Federal Government. That is a good reason to eliminate the Federal Department of Education and fund the States through the Treasury Department. A plus to this is reduced personnel and office costs at the federal level while a minimal cost to the states and school districts as they already have an established system in place. As far as the loss of employee jobs in the federal government; many of the personnel can be transferred to open jobs in other Federal agencies.