Monday, May 16, 2011

Solving the Budget Deficit—Step One: Transparency

From my previous posts you know I favor solving the budget deficit by addressing both taxes and expenses. A couple of days ago House Speaker John Boehner indicated that he was unwilling to raise the debt limit unless trillions were cut from the future deficit and all the cuts must be from spending. He’s drawn his line in the sand: there must be no increase in taxes.

Here is a gift to Speaker Boehner: a rabbit he can pull out of his hat to save his rhetoric while returning to the reality of our situation. Simply identify all tax deductions as spending and shift them from “negative revenue” to “tax expenditures.” Since doing so does not increase any tax rates, Boehner and his knee-jerk no tax increase fanatics can eliminate tax expenditures without raising taxes.

I’ll be surprised if that’s not how some savings comes about. Witness the current attacks on BIG OIL. Eliminating some of their “subsidies” (read tax expenditures) will be a sop to the masses and allow Republicans to avoid using the “T” word.

If it were only John Boehner’s political ass my idea was saving, I couldn’t care a whit. However, the primary purpose of my recommendation to recast the negative revenue of tax deductions into the positive tax expenditures is to help the voting public understand where we currently spend our money—all of our money. To balance our national checkbook we need to understand both direct and indirect expenditures.

By recommending this approach to understanding the Federal Government’s revenue and expenses, I am not adopting the perspective that the nation’s entire GDP belongs to the government. What I am proposing is, given our current tax structure, it is equally important to understand where and how we directly spend money and where and how we implicitly spend money by choosing not to collect it through tax expenditures.

A dollar that we give to farmers to guarantee a minimum price for their crop costs us the same as a dollar we give to a mining corporation when we charge them less than fair market value for claims on Federal government (read OUR) property.

Because not all citizens have mortgages, we must understand how much we collectively spend to subsidize those who do have mortgages. Similarly, we need to recognize the government is subsidizing individuals and corporations when they make “deductible” charitable contributions.

These expenses need to be sitting on the same side of the ledger as the money we spend to provide for those without jobs, to care for the mentally and physically disabled, to wage war in Afghanistan and Iraq.

When I was working, I advocated that my employer should post all salaries so every employee could know who made what. If management couldn’t justify differences between two people then they needed to fix the problem, not hide behind secrecy. So too with our Federal direct and indirect spending. If there is a provision in a law that says it does not apply to any corporation who meets X, Y & Z provisions and it turns out only one corporation meets those provisions, that is a tax expenditure from our pocket to that corporation’s pocket.

We know the Federal government’s finances are so much sausage. It’s time to see all the ingredients.

Only with the bright light of transparency can we engage in an open discussion about what services our federal government should provide, what state and local governments should provide and what remains for individual effort.

~ Jim

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