SalemNews.com, Salem, MA

December 5, 2013

Column: We need jobs, budget and tax reform plans

Brian T. Watson
The Salem News

---- — Within two weeks, the Murray-Ryan congressional budget committee will report to us whether it has been able to develop a set of recommendations for near-term and long-term federal budgets.

Although that’s a huge and complicated task — we should be happy if the group can even make a start — there are many budget reforms that could be implemented. Some of them are within the scope of the committee’s review, while others fall to other agencies. But all possible reforms should get increasing attention.

I take as the rationale for those reforms a number of simultaneous national goals: increased employment, stimulation of the economy in the short term, long-term budget sustainability, environmental sustainability indefinitely and a lessening of the gulf between the wealth concentrated at the top of our population as compared to the assets of the rest.

(A word about that last item. Today, roughly 25 percent of our total national income goes to the richest 1 percent of citizens. That is the highest rate since 1928. In the 1970s, the richest 1 percent took in 9 percent of the income. Too much of an income gap is corrosive to democracy, unfair in numerous specific ways and bad for the economy. The rich simply cannot spend all that money to create jobs, and the rest of society is left with insufficient funds to fuel the economy’s necessary amount of consumption.)

It is my hope that Murray-Ryan will look hard at the defense budget — already receiving substantial sequestration-mandated cuts — and require additional long-term (next 10 years) cuts. Although defense officials should be allowed more discretion than accompanies sequestration, there are still many wise places to cut.

For example, young, capable, working military retirees who can use their employer-provided health care should be required to do so, rather than using the federally funded Tricare system. We should also reduce outright the number of troops (Army and Marines) we keep in uniform; a number of bipartisan reports have suggested roughly 275,000 personnel could be cut, which would include many noncombat jobs at the Pentagon itself. Note that roughly 42 percent of the defense budget goes to administration, overhead, salaries and benefits.

On the hardware side, many weapons programs — flawed, bloated and sometimes unwanted by the Pentagon itself — suck money unendingly. Global military bases, prolonged conflicts (Afghanistan), and popular, “congressional-district” military contracts all serve to inflate defense spending. Realistically, over 10 years, we could safely eliminate some number of air wings, retire two aircraft carriers and some number (about 50) of ships.

Furthermore, archaic accounting and monitoring practices afflict defense spending. Literally, billions of dollars of spending simply cannot be accounted for. Former Defense Secretary Robert Gates estimates that roughly 30 percent of the defense budget — now 20 cents of every tax dollar — goes to waste, fraud, overhead and inefficiency.

Some of the savings from military cuts could be used to fund spending on improvement to America’s infrastructures. Work on the road networks, mass transit, the electric grid, Internet access and various energy sector projects — perhaps undertaken in public-private partnerships — would help to green our economy, provide new jobs and increase the productivity of business. It would also reduce the burden of the unemployed on government social services. Some careful stimulus spending now is seed money for future growth, new technologies and revenue.

Although critics of government spending like to point out the tale of Solyndra, a solar company that failed after receiving $535 million in federal loan guarantees, a little further research shows that the government’s loan record is actually quite good. It has been only Solyndra and a couple of smaller ventures that failed; otherwise, nearly $20 billion in loan guarantees to renewable energy initiatives have been successful. And venture capitalists themselves remind us that some risk is unavoidable — they expect one-third of their own initiatives to fail.

In addition to defense cuts, there are other efficiencies to be wrung out of government programs. Reforms to Medicare and Medicaid (to be addressed by the Affordable Care Act), various housing programs, agricultural subsidies, the prison system and the tax code can all yield lower spending or more revenue. Elimination of a host of deductions and loopholes in the tax code is overdue. Social Security — today in good shape — could be tuned up by gradually raising the retirement age and by taxing all income above $113,700 (now exempted).

More revenue — for the purpose of reinvestment — could be had from a financial transactions tax, a carbon tax and an increase in the gas tax, with accompanying changes to the Earned Income Tax Credit, so that working-class families won’t lose ground. A 900-word column can’t possibly survey all of the spending cuts and all of the new revenues that we could identify, but some things that we should bear in mind as we blend cuts and taxes are: fairness; both the short and long view; a knowledge of the changes of the last 40 years; and an appreciation that the government and the private sector are already (and have been for a long time) deeply intertwined in infinite ways.

We need millions of new jobs, creative responses to a host of present and coming problems, smart budget goals and new revenues. We aren’t going to be able to get any of that satisfactorily without plans.

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Brian T. Watson is a Salem News columnist. Contact him at btwatson20@gmail.com.