Tuesday, September 25, 2012

Solution to the National Budget Problem

This post will be somewhat political in nature, and I do not expect everyone to agree with me, but I am going to write it anyway. It has been bouncing around in my head for too long. I am not trying to offend or promote any specific party views, I am simply expressing my own.

Many of us have heard quite a lot about the upcoming Presidential election, and one of the hot topics is the national budget. So far I have heard very few ideas for fixing it that make much sense. Most are far too little, way too late. First of all, I am tired of hearing about how the budget problems are all Obama's fault. While he is responsible for some of the spending, keep in mind that the budget has to be passed by Congress. If you don't like the current budget situation, consider who you are voting into Congress. Also, it should be noted that government spending since Obama took office is actually lower than projections made based on spending trends of past presidents. Much of the spending blamed on Obama early in his term, specifically some of the bailouts, actually occurred before he came to office. The reason he is blamed is because they took place during fiscal year 2009, which began in October 2008, about five weeks before the elections. Much of the spending that took place the year Obama was elected was due to policies that were already in place before his inauguration. You can find a much more detailed report of government spending over the last few years by going to http://www.factcheck.org/2012/06/obamas-spending-inferno-or-not/. But today I am not going to talk a lot about past spending, but rather the future budget.

Over the last several months, I have heard countless solutions to the national budget deficit. The problem is, none of them will work. They are far too small to have any effect, much the same way paying a few cents on a half million dollar mortgage would be pretty pointless. The deficit is trillions of dollars, and even the best solutions I have heard would only save a few billion. Most would only save a few million. Most solutions eliminate or downsize a government program on the basis that it is not profitable. Since most government programs are not even designed to be profitable, I believe that is a pretty weak argument. By that reasoning alone, we should simply eliminate the government, because it is not profitable! The flaw in that solution is obvious though.

First of all, I believe there are certain programs that will never be profitable, but need to exist for the betterment of our economy, quality of life, and general well being as a nation. The post office is one of those programs. The post office does not make a profit, despite having competitors in the industry that are able to do so, yet most people would agree that we need to keep the postal service around. The social security system was never designed to make a profit, but rather to help people save for the future. While most people supplement their retirement with other programs, such as a 401k, mutual funds, or other investments, I think it would be unfair to the American people to eliminate the Social Security system, especially for the people that have paid into it for most of their lives. I agree that the system does not work exactly as it was designed, but I thought that we, as Americans, fixed things that were broken. The Social Security system is broken, so we need to fix it, not throw it out! Speaking of retirement, the government ought to stay out of private retirement accounts. The Railroad Retirement system has been a target this election, which makes no sense at all. The Railroad Retirement System is 100% privately funded by the railroads and railroad workers of the United States. It has no connection to the Social Security program, and costs the American people exactly nothing. Actually, the Railroad Retirement is a source of income for the government, because the Railroad Retirement Board actually pays the government to administer the system and send out the checks. Eliminating the system would leave over 250,000 people without a retirement, and would eliminate a small source of income for the government, without saving Americans any money at all.

Since we are talking about railroads, I think Amtrak needs to stay. I realize that it costs money to operate, but that cost is small compared to other transportation systems. Amtrak employs nearly 20,000 Americans, in positions that cannot be outsourced to foreign labor for the most part. While I do think the money spent on Amtrak could be spent more efficiently, I doubt that will happen unless we let businessmen run Amtrak instead of Congressmen. Also, I believe Amtrak is too small to make any significant profits anyway. They are expected to be a national system, yet they do not have the equipment or resources to really provide enough service to make money on it in most places. There are no for profit transportation systems out there that try to cover the entire country with as little equipment, infrastructure, and service as Amtrak, and I think Amtrak will continue to be unprofitable as long as the budget forbids any significant growth. In order to make money, I think Amtrak would have to run several daily passenger trains on nearly every current freight rail line out there. Not all routes would be profitable, but I believe the system as a whole would make money, and the economic impact would be big. Just to give an example, the Empire Builder, which connects Chicago with Portland and Seattle, directly employs 3,000 people, in seven states, and contributes over $100 million annually to local economies along the route. That is just one route, which makes a rather small profit. Other long distance routes have similar statistics. Imagine how much Amtrak could do for our economy if it operated more trains to more places. Aren't we looking for programs that stimulate the economy, seeing as we are currently in a recession? If we were to eliminate Amtrak on the justification that it does not make a profit, we would be crippling the economy in many small towns across America and removing a service that over 30 million people use every year. Eliminating transportation programs because they are unprofitable begs the question, what about the highway system? That costs significantly more than Amtrak and is a lot farther from making a profit! I think short hop federally subsidized flights to small towns ought to be replaced with intercity trains. One train can serve dozens of towns easily, where one airplane can only serve a few towns at the most. As an example, in Glendive, we have two daily flights to Billings. The service is lousy, and the flight is cancelled nearly half the time for mysterious reasons. That's flight is barely used, because even with the federal subsidy, tickets are outrageously expensive. The Glendive airport is several miles out of town, and has exactly four parking spots, so even if people were to use the flight more, it is not particular Larry convenient. The train depot in Glendive is in the middle of town, within walking distance for most people, and has over a hundred parking spots. If a passenger train connected Glendive to Billings, people could easily take the train in, and that train could serve other towns along the way, such as Terry, Miles City, Forsyth, Hysham, and Lockwood, and then go on past Billings to serve Bozeman, Helena, Missoula, Spokane, Seattle, and all the small towns in between. Going east would be similar. It would be far more convenient and affordable than the current federally subsidized flight is.

On an unrelated note, I think the federal healthcare system has to go. Health care coverage should be determined by the states individually, like any other welfare program. I believe the motive is good, but the application needs a bit of work still. As far as welfare programs (including public health care programs) in general go, I think we need to keep them in place. I think it is our duty, as human beings, to help those in need. Now, I believe that the person, group, organization, or government providing the help has the right to provide it only if the recipient is willing to meet certain conditions. Obviously, there would need to be a legitimate need. I also think welfare and healthcare recipients should need to go through both regular and random drug screenings. Their blood alcohol level should be monitored during those screenings as well. Showing up drunk once should not eliminate them from receiving benefits, but alcoholism should be addressed and eliminated. Basically, I do not have a problem with a welfare recipient going out with friends to a bar once in a while, but a welfare recipient should not be regularly buying things they really cannot afford, such as drugs or alcohol. I think the welfare program should be organized more as a rehabilitation program than a handout program. In addition to helping people buy food and pay bills, the welfare program should help people to get education and training needed to get a job and become self sufficient. I do not think a welfare program needs to write out checks every month, but I think the goal with any welfare program should be to help individuals and families get what they need to become self reliant, whether that is education or a job, or just a check to pay the electric bill for a few months that are tight. People who do have problems with alcohol, drugs, or other addictions should get help overcoming them so that they can better contribute to their own lives and to society.

Now we talked about retirement earlier, and I think there is one retirement that out to be changed a bit. That is the retirement of our politicians. Congressmen and the President get their salary for the rest of their life, regardless of how long they serve. I could serve a two year term in the House of Representatives and get that salary for the rest of my life. I think this, combined with high pay has corrupted politics by making it a career. The way I understand it, politicians are supposed to be public servants, and I think their salary and retirement should reflect that. I think politicians should get more of a stipend for their travel and living expenses incurred while fulfilling their duties of office. Going to a world class resort in the Bahamas for a meeting with lobbyists does not constitute an expense of office. Renting a conference at a modest local hotel to meet with other leaders does though. I do not think politicians should be expected to pay the expenses of office out of pocket, but I think they should be expected to be frugal with the taxpayer's money they are spending to get their job done. I think a stipend for travel to and from Washington, a small, modest apartment, and reasonable food and transportation expenses while on the job is fair, but the enormous, inflated salaries they currently get is just encouraging people to consider politics for their own benefit, and not for the betterment of society. Also, I think retirement for politicians should be more similar to any job. If you only put in a couple of years, you do not get as much of a retirement at most jobs. I think getting their salary for life is ridiculous honestly! I would not take it away from past and current politicians, because that is unfair, but for future politicians, I think the retirement should be drastically scaled back.  I think the government should contribute to their retirement plans, such as a 401k, just like any other employer, and to Social Security, like any other employer, and that should be about where it ends. I also think that politicians should be subject to the same tax laws as everyone else. They should not be getting big tax breaks just because of their office. They should pay the same taxes as anyone else in America. Maybe if politicians were paid more like the public servants they are supposed to be, fewer people would get into politics just for themselves, and we would have better leaders.

Speaking of taxes, I think the tax cuts that were authorizes by President Bush should be allowed to expire, or repealed. While it is nice to get a break, I believe the money would be better spent getting people back to work. If people are working for a living, and jobs are being created, people will spend more money, and the economy will recover faster. It is like that proverb, "If you give a man a fish, you feed him for a day, if you teach him to fish, you feed him for a lifetime." While it is nice to get a hefty tax refund, that money will eventually be used up and the recipient will be back to the same situation. If programs are created or expanded to employ more people, those people will have a continuous source of income, and their situation will improve.

Even with all of these changes in spending, the budget deficit will not go away overnight, and maybe not at all. Other options ought to be considered, and I think the government ought to seek other sources of income, besides taxes and government bonds and investments. In Alaska, corporations and people who extract natural resources pay the state for their removal, and then the money is invested. The state budget is based off the dividend income from those investments. While the amount of income varies from year to year, based on the economy and the stock market, the income is always there. In fact, that system works so well in Alaska that residents pay no state taxes, and yet the state is one of the only ones operating with a surplus in the budget, despite the recession. Perhaps options, similar to Alaska's system, as well as others, ought to be considered by the federal government, to supplement the tax income and close the gap between income and spending.

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