11/07/2011 11:35 am ET | Updated Jan 07, 2012

The Debt, the Deficit and Jobs: What Obama Should Say But Won't

They say that a politician who tells the truth exists only in stories. And if he did exist, then his reward would be to lose his job. Well, I would rather be a one-term success than a two-term failure. I want to tell you the truth, even if it turns out to be hard on all of us.

The first truth is that this whole debate about the annual deficit and the national debt has been a fraud. Neither Democrats, nor Republicans, nor I, have been serious about eliminating deficits or about reducing the national debt. Every plan, and I mean even the House Tea Party plans, guarantees more deficits and another $10 trillion or more added to the debt in the next 10 years.

Why is this so? Because with an annual deficit of $1.5 trillion or so, the celebrated August deal to save over $3 trillion in 10 years means only $300-plus billion in savings each year, creating over $1 trillion in new debt, or $10 trillion more in 10 years. Simple arithmetic. Simple facts. No one is talking seriously about balancing our budget. No one.

Of course, this assumes a deficit baseline of $1.5 trillion each year. We all want to reduce the baseline budget, but is it smart to guarantee how much budget discipline we will have over a 10-year period? It's safer to assume a worst-case deficit than an optimistic one.

If we can't afford a $14-trillion debt right now, as some say, does it make sense to create a $24-trillion debt in 10 years? Well, of course we can afford the current debt, and we probably could handle another $10 trillion, but who wants to go deeper in debt when we have so much to do to revive the economy and to put people back to work?

Why is it so hard to balance the budget? We have been borrowing instead of paying our way. We have been building a burden for our children and grandchildren instead of taking responsibility for our debts. We have been running up the national credit card bills and making the minimum interest payments. You know where that leads: to personal and national disaster.

How did this happen? First, we passed the Bush tax cuts, expecting them to create jobs and stimulate the economy. But they didn't work. The Bush tax cuts created few jobs and never paid for themselves. Those who call for more tax cuts need to look at the reality since 2000 and admit that calling for more tax cuts is a political statement with no regard for the consequences. Cutting alone is not an economic program. So, if we continue the Bush tax cuts, they will add over $400 billion a year to the debt, or $4 trillion over 10 years, wiping out the savings recently agreed to.

The truth is, we can't afford the Bush tax cuts. I propose that we accept reality and phase them out. Doing this gradually, over the next four years, will not harm the economy and will eliminate this drain on our finances. It's the first step toward managing money responsibly.

I am not talking about just raising taxes on the rich. I am talking about all the Bush tax cuts. All of us need to contribute to paying our way. This is what patriots do when the country needs it. While every taxpayer will pay a little more, the burden of eliminating the Bush tax cuts will fall more on those who earn more, as it should.

The second major factor that expanded our deficits was the vast expansion of national security after 9/11. In 2001, our defense budget was the biggest in the world by far, but it was under $300 billion a year. Can you believe it? It is now over $700 billion a year, not even counting homeland security costs. None of this expansion has been paid for: it has been financed by borrowing. Instead of buying war bonds, as in World War II, we have asked future generations to pay for our defense. This is both selfish and irresponsible. We need to pay our own way for defense and homeland security. We need to reduce the defense budget by a lot more than anyone has proposed. At a core defense budget of $400 billion a year, we still would be spending more than the rest of the world.

But how can we cut the defense budget by so much? First, we will end our occupations of Iraq and Afghanistan as soon as we can, and then help those countries rebuild. Next, we will bring home more of our troops from around the world. Do we need so many troops in Europe? Do we really need more than 800 military bases around the world? Doesn't that look like an overextended Roman Empire, even if our motives are pure? Other nations are right to be concerned about our military presence near their gates.

I am directing that 400 overseas bases close in the next four years. In addition, we will stop our military expansion into Africa. That long-suffering continent needs our aid more than our arms. We also will bring home half of our troops from Europe, and half of our troops in South Korea. Overall, half of our military personnel will be brought home in four years. The savings will be great.

We also have to fight harder to eliminate unnecessary and expensive weapons systems. For everyone who suggests that bases and weapons systems provide jobs and support the economy, we will ask if those jobs contribute to our long-term economic health. Or, do they take away from investing in our schools, infrastructure, alternative energy, fundamental research or, most important, jobs in the civilian sector? We can and must have guns, but when faced with a real choice between guns and butter, we will choose butter. Fear will not drive us to waste money. Fear will not drive us to sacrifice our people for a few corporate giants. We will choose wisely and spend what we have to spend on defense, not what some want us to spend.

Making these cuts will be hard, no question about it. And it will take several years to achieve all that we need. But, doing this will make us stronger economically, while preserving a strong core defense program.

And until our defense cuts are achieved, we need to pay for our military, not borrow against the future. We need to pay for the past 10 years, as well. That is why I am proposing a national security surtax of from 2 percent on low income taxpayers up to 5 percent for the wealthiest. This will pay our way while we debate the future size and shape of the defense establishment.

Are we done now? Unfortunately, phasing out the Bush tax cuts and paying for our defense will not be enough. Together, they account for just over half of the annual deficit. What about the rest?

Let me start with the corporations. Their tax payments as a share of total federal tax income have dropped from over 40 percent to under 20 percent. Think about that: individuals now carry nearly 80 percent of the tax load, while corporate tax cuts, breaks, and subsidies allow the corporate sector to pay half of what for many years was considered their fair share. This has to stop.

We need to eliminate these tax breaks and subsidies, including for corporate agriculture. This is good economics, recovering $100 to $200 billion a year for the public. It also is good for business, leveling the playing field: corporate success should go to those who truly innovate and create good jobs, not to those with good tax lobbyists and tax lawyers. Every large corporation must be made to pay a minimum tax, not a zero tax. Getting government out of the way of the private sector must include this leveling of the playing field.

Next, we have to come to grips with the health sector. Unless managed properly, health care costs will drag us down to road to bankruptcy. Here, too, we need to act as clear-eyed adults, building a better health care system without breaking the bank. It has to begin with us: we expect too much. We expect access to every possible medicine, every possible surgery, and all the care we need no matter what the cost. In short, we all expect the maximum possible health care.

This is neither realistic nor affordable. We have to create a balanced health care system, not a maximum-for-all system. And here, hard decisions will have to be made, decisions we have been postponing for too long. For example, should we spend $100,000 a year for a cancer drug that may extend life three or four months? As individuals, we all would like more time. As a society, is it really the right choice, the proper allocation of limited resources? How should we balance the needs of the young and the working against those of the aged? We can't have it all: again, we need to be adults and make the moral and responsible choices.

Paying for health care procedure by procedure is a prescription for ever-escalating services. Obviously we should pay doctors a good salary, but we also need to remove the incentive for them to choose expensive procedures, or to open labs or clinics as sidelines. Thus, we should put doctors and other medical personnel on a salary and reduce their workloads, as well. This will be a major step toward controlling health care costs.

The second step is to cut administrative costs, for both hospitals and clinics, and for the insurance industry. Our goal should be no more than 5 percent in administrative costs, rather than the 10 percent or more we see now.

Hundreds of billions of dollars would be saved each year by these two steps. And, if these are not enough, we need to be willing to go further. We can and will continue to have a great health care system, but we can't "have it all."

Third, we need to address the cost of the federal government. While I believe strongly in the importance and effectiveness of our federal work force, it is clear that it takes too long to fight to cut budgets and improve services one at a time. It is time to set priorities and force the needed change. I am calling for us to cut the federal work force by 10 percent over the next four years, and the federal contracting budget by 20 percent in the same time. These cuts will be across the board, for every agency, including defense. Every department and agency will be required to make proposals on where and how to cut back and will collect public input before final recommendations. Nothing sharpens the mind like having to make cuts, and we need these across-the-board cuts to make us sharper.

Finally, we come to jobs. Our stimulus packages may have kept things from being worse, but job growth is unacceptably small. The banks and financial institutions we saved have hoarded cash instead of loaning it for new businesses and growth. Corporations with all-time high profits are not hiring our citizens but continue to outsource to other countries. So, once again, we have to stimulate the economy. This time the focus has to be on hiring people, not on planning or research. We need to get money into the hands of the strapped poor and middle class, and into the hands of the employable but unemployed. I am proposing a $3-trillion stimulus package, targeted at jobs. Infrastructure projects that are ready to go will get priority. Rehabilitating our schools and hospitals and roads and railways will get priority. Insulating our homes and offices will get priority. Energy-saving technology will get priority. This kind of stimulus will turn around the economy and pay for itself through economic growth.

Many will say that all of this is too radical, too damaging, too impractical. I say that this is essential for the future of the country. Democrats, Republicans, Independents, all of us have to take our budget problems seriously and make the serious changes we need.

But most important, we all need to have an economy of patriotism and shared sacrifice, as well as shared effort, to fix our financial situation. The time for slogans has passed. The time to join together is now. In crisis, patriots come together for the sake of the country. I call for all patriots to help us make the serious choices, the grown-up choices, that will bring us a brighter future.

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