Treece Blog: Eliminating the 2013 deficit without raising taxesWritten by Ben Treece | | email@example.com
After my column “Eat the rich and starve to death,” a reader challenged me to draw up a balanced budget for the United States federal government. As an added bonus, I was asked to outline the consequences of any cuts or reductions made. I quote the reader, “You have to explain the ripple effect of each program you cut. If it means people die, then you have to say that. If it means all of our insurance rates will go up, you have to say that.” While it is impossible to predict the exact outcomes of each program cut, I can make general assumptions about what we could assume would happen.
I would like to point out that I used the numbers provided by the White House from their proposed 2013 budget. If there is any overlap in funds or discrepancies I apologize in advance, however I did my best to make sure that no funds were double-counted or exaggerated.
The fiscal 2013 budget looks to add $901 billion to the national debt according to the White House. As a fiscal conservative, most readers would assume that I would slash Medicare/Medicaid spending to nothing, cut Social Security, alter tax structure, etc. However, overhauling the system is a difficult task that I would use as an approach to lowering the deficit, since it is a long-term plan that takes time to implement and see real changes. I have taken the approach of decreasing wasteful spending and eliminating programs that require less funding, receive alternative funding or have been unsuccessful at accomplishing the goals they set out to achieve.
Currently, members of Congress take home $174,000 a year, while House/Senate party leaders take $193,400 and the Speaker takes $223,500. The president takes home a $400,000 salary, a $50,000 annual expense account, a $100,000 nontaxable travel account and $19,000 for entertainment. The vice president then takes home $230,700. I would pay all members of Congress, the president and vice president a modest salary the same as the median U.S. household income, $50,000. This would save us $67.9 million a year. A small dent, but a necessary change.
Defending our nation and promoting interstate commerce are truly the two main purposes of a federal government. However, having bases in foreign nations such as Germany or Japan seems unnecessary given our current economic situation. Furthermore, according to Business Insider, $11 billion has been “lost” in Iraq since ’07. If we were to cut down on wasteful spending such as that and cut the $851 billion broadly labeled “National Defense Budget” by 25 percent we would save $223.75 billion, roughly 25 percent of the deficit so far. I should also point out that if this cut meant a decrease in pay or treatment options for service members, I would reinstate these funds in a second (Veterans Affairs is separately funded).
Unemployment insurance solvency
This is the section for which I am sure to get an angry response or two; all I can say is do not blame the messenger. When the nation is in the state that it is in, we cannot afford to pay for individuals to sit around and not work. This is not a moral conflict or an ideological statement, it is a fact. In 2013 unemployment insurance is set to contribute nearly $4 billion to the deficit, but the White House states that by 2015 this spending will result in a nearly $8 billion decrease of the deficit. If it is going to net out anyway, why not just do away with it all now? That puts $4 billion back on the books.
Sen. Tom Coburn (R-Okla.) created the 2011 Wastebook, which highlights useless government grants on ridiculous studies and projects. Once totaled the 100 items listed sum up to nearly
$7 billion in waste. Let’s assume a 10 percent deviation in case anything has been double-counted so far, that is $6.2 billion in waste. If we spend frugally and stop using federal funds to buy iPads for kindergartners (one of the items outlined in the report), we could see some real savings.
Programs to severely cut
There are a few programs that I would drastically cut for one of three reasons — their job details do not require massive funding anymore, they receive alternative funding, or they have been unsuccessful in accomplishing their goals. Those programs I would reduce funding for would be NASA ($17.7 billion to $2 billion), the Department of Defense ($525.4 billion to $325.4 billion), Treasury Department ($14 billion down to $2 billion), Department of Transportation ($74 billion halved to $37 billion), Health and Human Services ($76.4 billion down to $1.4 billion), State Department ($51.6 billion down to $600 million) and the Department of Justice ($27.1 billion down to $10 billion).
Programs to eliminate
The amount of money spent on ineffective programs in this country is truly nauseating. When the national debt is continuing to climb due to frivolous spending, it is time for some programs to go. I would eliminate Housing/Urban Development ($44.8 billion saved, they already receive funds from the sale/purchase of any home, which should adequately fund them), the National Science Foundation ($7.4 billion saved), Department of Energy ($27.2 billion saved), Department of Education ($69.8 billion saved), Corporation for National and Community Services ($1.1 billion saved, the government does not need to try and fund citizens who want to help make a difference and work with charities), Corps of Civil Engineers ($4.7 billion saved), Overseas Contingency Operations (separate than D.O.D. or defense budget, works to train foreign militaries and promote coalition partnerships, save $96.7 billion) and the Department of Labor ($12 billion saved).
Sum it all up and we have savings of more than $905 billion, all without raising taxes or touching Medicare, Medicaid or Social Security.
Some of these cuts would mean that federal employees will lose their jobs, federal funds for research will diminish, and some regulatory holes will open. My suggestion as an alternative would be to allow states to have the right to regulate industries and fund research (it is not in the constitution that the EPA must exist), and allow the private sector to thrive. Brokers and dealers are governed by FINRA, a self-regulating organization (SRO). While FINRA is a bad example due to their demonstrated incompetence, there are several SROs out there who effectively regulate their specific fields. As for the federal employees who will be out of work due to these cuts — it truly is for the best for our struggling economy. These employees do not contribute to GDP or economic growth; they draw pay from the tax pool but do not create any goods or services that result in positive economic growth. Hopefully, these employees would be forced to find a job with the private sector and contribute to strengthening the economy.
Remember, I am not suggesting that this is a long-term viable option. I am simply stating that if we want to eliminate the national debt we have to start with a balanced budget, and to do that cuts must be made. It is as simple as that.
Ben Treece is a 2009 Graduate from the University of Miami (Fla.), BBA International Finance and Marketing. He is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and a stockbroker licensed with FINRA, working for Treece Financial Services Corp. The above information is the express opinion of Ben Treece and should not be construed as investment advice or used without outside verification.