Saturday, April 16, 2011

Thomas Sowell's Plan to Cut the Budget

"The liberals' easy solution is just to increase taxes on "the rich." But, if you do the math, there aren't enough of "the rich" to cover the huge and record-breaking deficit."

Why will no politician admit what is obviously true? Thomas Sowell wrote an article detailing his plans about how to cut the budget. William Anderson, at his blog Krugman-in-Wonderland, points out that the point of these taxes for politicians is not about revenue, "but rather the economic and social vision that these people have -- and have for the rest of us, whether or not we want that 'vision' imposed upon us." So first and foremost, we must stamp out any claims that the budget can be fixed by just taxing the rich more. It is not going to work, and it is going to seriously hurt the economy. After all, it is not as if the rich do nothing with all of that money. That money is invested, it is loaned, and it is spent. All of these things create jobs. If you are going to demonize the rich, then do not forget the many rich people who have invested in your company and so have furnished your job.

But what about spending cuts? Are they feasible? Cuts will negatively impact many people, right? Well, first of all there should be a group of spending cuts that we can all agree upon that Sowell first mentions - subsidies for the rich. That is, farm subsidies and subsidies for "'green' policies." Ultimately, though, these spending cuts will not be enough, but they are cuts that need to happen for the sake of any sense of ethics. As for bigger cuts to programs that are much more popular, Sowell mentions the strategy used by Douglas MacArthur in World War II. He did not attack every island on the way to Japan, he only attacked those islands that he needed in order to get to Japan. His first recommendation?

Instead of attacking these programs as a whole, what is far more vulnerable is the compulsory aspect of these programs. If Medicare is so great, why is it necessary for the government to force people to be covered by Medicare as a precondition for receiving the money they paid into Social Security?

And the same applies for Social Security? Why not just allow people to opt out. He says (without any statistics as a reference but it is probably true) that someone who has a private retirement account is probably going to do better than the return on Social Security even if the stock market is down when he retires.

These all sound like great ideas, and I like them all, but I just do not see how these all add up to be enough. According to US Debt, we have $14 trillion in debt. What you do not hear about, though, is the $113 trillion we have in unfunded liabilities. Yes, the US needs to find $113 trillion to pay for all of these social spending programs. Frankly, that amount of money is not out there. The only solution, though no one is willing to fact it, is to completely and permanently end Medicare, Medicaid, and Social Security. There is no way around that fact, no matter how sobering the burden may seem. And is it really all that burdensome? After all, this country became the leader of the free world in the early 1900s before all of these social spending programs existed. So no, Mr. Obama, these programs did not make America great. Our economic policy of the 19th century made us great. We lead the world and we were in control. We were a creditor nation. These programs have made us a debtor nation, subject to the whims of those who have made loans to us. The path to greatness lies in abandoning these programs. People will be fine. They were back then and look at how much wealthier we are in this age.

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