The Life Of Government Is The Death Of Dreams

      Do not think about, write about or deal with  human behavior without determining the effects of incentives.

      The growth of government has attended the flattening of real standard of living. Coincidence?

    A politician concludes a stem-winding, tub-thumping, rhetoric-soaring, heart-pounding speech by saying, “These, then, are my principles. Of course, if you don’t like them, I have others.”

    A recent poll has demonstrated that 82% of Canadians believe that killing Bin Laden was justified. Seems like the namby-pamby school system doesn’t have as much influence as those running it like to believe. They would have it that Western Imperialists, aka the U.S., had produced conditions so vile that Bin Laden’s rage was not only inevitable but justified.

      The nations closest to debt default, Portugal, Ireland , Italy and Greece, have national debts over 100% of annual Gross Domestic Product with Greece’s being by far the largest in terms of GDP. The problem in the U.S. is that its debt is climbing to that level. Suggestions are made to reduce the debt while there’s still time.

John Stossel 
Battle of the Budgets

Since America is on the road to bankruptcy, we’ve got to make some changes. What would you do?

The Peter G. Peterson Foundation gave $200,000 to six think tanks to write budget proposals. The money went to the conservative American Enterprise Institute and Heritage Foundation; the "liberal" Center for American Progress, Economic Policy Institute and Roosevelt Institute Campus Network; and the Bipartisan Policy Center.

On my next Fox Business show, representatives from most of these think tanks will summarize their proposals, and I’ll have the audience pick its favorite. It’s a "Battle of the Budgets." The winner will get one of the Emmys I won during my days as a consumer reporter. I know, it’s corny, but I produce a TV program. If the subject is budgets, I’ll use any gimmick to make it interesting.

The proposals:

The American Enterprise Institute plan would reduce the debt-to-gross-domestic-product ratio to 60 percent. It’s 68 percent now.

AEI would preserve most military spending, but cut Social Security by giving every retiree an $850 monthly check and not letting 62- to 65-year-olds collect benefits early. The payroll tax would be eliminated on people 62 and older to encourage them to stay in the workforce. The age for Medicare would rise to 67, and the program would be revamped into a government subsidy for private insurance. AEI would eliminate farm subsidies and the child tax credit. AEI would replace all current taxes with a consumption tax like the "Fair Tax."

The Bipartisan Policy Center plan would cut the debt to about 50 percent of GDP within 25 years. It would freeze military and discretionary spending, require people with incomes over $106,000 to pay more into Social Security and "slightly" reduce benefits for the wealthy. Medicare spending growth would be limited to the GDP increase plus 1 percent. Beneficiaries could move to private plans.

The center would cut the top corporate tax rate from 35 percent to 27 percent and establish a new 6.5 percent "Debt Reduction Sales Tax."

Yikes! A new tax! I’m reminded of Milton Friedman’s words: "Nothing is so permanent as a temporary government program."

<insert>

       Nothing comes so close to everlasting life as a government program.

The Roosevelt Institute claims to reduce our debt to 63 percent of GDP. The plan would cut spending by ending the Iraq and Afghanistan wars by 2015, but make no cuts in Social Security, Medicare or Medicaid. The institute wants more spending on "domestic investment" — universal preschool, the safety net, transportation and worker retraining. Roosevelt’s tax plan would cut corporate rates by 3 percentage points, but create a new "too big to fail" tax on banks and impose a new "financial transactions" tax.

Under the Economic Policy Institute’s plan, jointly written with Demos (demos.org), our debt would increase to 90 percent of GDP. Military spending would be cut by $960 billion over 10 years. People making over $106,000 would pay more into Social Security, but Medicare and Medicaid would not be touched. The plan calls for $84 billion a year more in discretionary spending than President Obama wants — more for early childhood education, child care, public transit, rural broadband connectivity, and research and development.

EPI and Demos would repeal the George W. Bush tax cuts on high-income people; enact a 50 percent tax on estates worth over $10 million, a financial speculation tax, and a surcharge on top earners; tax capital gains and dividends as ordinary income; and increase the gasoline tax. It’s good to hear what liberals would do if they were in power.

Finally, the Heritage Foundation plan is the only one that would actually balance the budget. Federal spending would gradually drop to 18.5 percent of GDP, below the modern average. Heritage would preserve most military spending, but Social Security and Medicare benefits would be phased out for individuals making over $110,000 a year. The eligibility age would rise to 68 and then be indexed to life expectancy.

Heritage would replace all taxes with a simple flat income tax, with deductions remaining for higher education, charitable donations/gifts and mortgage insurance.

As a libertarian, I’m underwhelmed. This year, our government will spend an astounding $3.8 trillion. We need to eliminate entire agencies, departments and missions. None of these think tanks do that.

<end>

       Short-term pain or long-term death. Take your pick.

Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies