At this point most of the country has heard the story of "Aqua Buddha." According to an anonymous account, during his college days, Kentucky Sen.-elect Rand Paul dragged a woman down to a river and told her to bow down to the river, which he referred to as "Aqua Buddha." His opponent in the campaign tried to make an issue out of this incident by implying that Paul worshiped the river as a god.
Whatever the truth of this incident, it doesn't come close to the silliness exhibited by Alan Simpson and Erskine Bowles, the co-chairs of President Obama's deficit commission. Among the items on the to-do list of the chairs was a cap of government spending at 21 percent of GDP. One can only assume that the number 21 bears some sort of religious significance for Simpson and Bowles because it certainly makes no sense to have this sort of rule on policy grounds.
The standard way to determine the size of government is to have the government perform the services that are more efficiently and effectively done by the government than the private sector. If the total value of these services is less than 21 percent of the economy, that would be fine. On the other hand, there is no obvious problem created if it is more than 21 percent, except for those with religious beliefs about the number 21.
The point is fairly straightforward. There are a number of services that are obviously performed better by the government than the private sector. Almost everyone's list would include the military, police and fire departments. Most people also think that the government has a responsibility to ensure that children get an education and ideally a good one. Some of these services can even be contracted out, but the money still must be raised through tax revenue and pass through the government.
It turns out that public retirement plans like the US Social Security system are far more efficient than their private sector counterparts. The administrative costs of Social Security are less than 1/20th the cost of maintaining 401(k)s on average. This makes a strong argument for a public social security system.
Any individual program must be assessed on its merits, but suppose a careful examination of these programs gives a total government share of the economy in excess of 21 percent. In this case, the Simpson-Bowles 21 Percent Rule would dictate that we shift some services that are more efficiently provided by the government to the private sector. This implies wasting resources, thereby, slowing growth and costing jobs. In other words, because of Simpson's and Bowles' reverence for the number 21, we will have to throw people out of work.
It is possible that Simpson and Bowles are basing their 21 Percent Rule on political economy grounds. The story would be that out of control politicians just can't keep themselves from continually increasing the extent of government interference in the economy. There are two problems with this picture.
The first problem is that, insofar as this is true, the Simpson-Bowles 21 Percent Rule won't help. If politicians are determined to interfere in the economy, it is easy to find ways to do so that do not involve direct spending by the federal government.
For example, the federal government can pressure state and local governments to spend through either mandates or matching funds. It can also use tax expenditures to replace spending. For example, the tax deductions for housing and employer-provided health care are mechanisms through which the government subsidizes housing and employer-provided health care. However, these subsidies don't count as part of the Simpson-Bowles 21 percent.
The government can also redistribute income by shaping markets, for example by providing or extending patent and copyright monopolies. It can also erect or eliminate trade barriers in various markets to steer income in specific directions.
In short, out of control politicians will not be prevented from interfering in the economy by the 21 Percent Rule, they will just have to take a different course. And, in most cases, the different courses pursued are likely to involve less transparency and more inefficiency than direct government spending.
The other flaw with the political economy argument is that it is fighting a problem that does not exist. According to the projections from the Congressional Budget Office, noninterest spending is projected to be 18.6 percent of GDP in 2020 (total spending is projected at 22.7 percent) . In 1980, noninterest spending was 18.8 percent of GDP. This means that, over this 40-year period, the share of federal spending on programs will have actually fallen by a small amount. Federal spending has not been out of control, as Simpson and Bowles seem to believe.
In other words, the 21 Percent Rule is bad solution for a problem that does not exist. We should pray to Aqua Buddha that Congress doesn't take it seriously.
All they do and have done is focus on ways to turn taxes into profits.
They need to pay more taxes. They have too much money to buy our politicians.
Part of that revenue problem is the recession, which reduces tax receipts. But staring us in the face is another part - the Bush tax cuts.
I, for one, refuse to be dragged into a debate about "debt" by people who only consider the expense side (and even then, refuse to look at "Defense" and other parts of the budget they like) and refuse to acknowledge the elephant in the room - the huge reduction in taxes paid by the wealthiest corporations and individuals in America.
If you can't acknowledge that and consider it as part of the national debt picture, you're not serious. Period.
Private health insurance is less efficient than public, costs the country more. But the profits go the rich stockholders, so we can't get rid of it, the rich won't let us.
The purpose of privatization is increased profits for the rich, not increased efficiency.
It should be 10%.
Let me guess, you had no complaints about the 800 billion pork bill misnamed the stimulus package?
Al Capone was not that smart. He was caught also by tax evasion. The only way to not pay TAX was for him to hire more thugs or build more buildings. He did neither. He simply took the worker for no SWEAT and GENIUS. Like Wall Street, Banking, Investment Markets
There is no need to limit spending if, in real terms, spending has not gone up. This privatization scheme never works and always costs the American taxpayer more in the end.
There is no Macro or Micro demand. lost jobs, low salaries, displace workers. This is an imbalance of the Capital supply side vs the Labor supply side.
Tax cuts to the Supply side make less Aggregate Demand. Business are motivated to make money. No Demand no Money. the more money you give them the Widgets they don't have to sell raising the price of Widgets that are not drirvin down by no Demand anyway
Tax raise to the Supply side will force business to give TAX to the Fed or HIRE or Invest. WOW
Public Spending on a down CYCLE brought us out of the smaller GREAT DEPRESSION with FDR Keynesian economics. ONLY thing that has ever worked. Build the ROAD and BRIDGES will privatize spending 14 times the public sending. WHAT WE NEED
WWII was a CONTROLLED MILITARY economy. GUNS and not BUTTER No products to be had. Unless you traded in GUNS.
Time for B.S to stop talking and we start Walking out of this Down Cycle.
Privatizing Haliburton, Fanny Mae, Blackwater, is the TRUE Entitlements to our Tax Dollars. You tell me how good privatized Banking, Insurance, Oil, Airline, Farming, work. SSA is self sustaining and MY INVESTMENT.
Does Chavez have these problems? I mean no concern for the public
I like a limit of 21% of spending and would prefer 19%. It makes people think about what they are doing. If States get pressure they need to think as well. You can go around a slam the private sector, but people can chose to get ripped off or not. With the government black hole of graft, they cannot.
So maybe we can start here:
No earmarks until we cut enough other spending to close the deficit. Sure defense, but we should roll back disc spending to 2006, return unspent stim to Treasury, rescind all pork and spending in HCR that does not contribute explicitly to coverage, disallow patent extensions, doctors and hospitals must take Medicare, excluded corporations and unions must be in the system on day one and force the government to bid on every purchase from drugs to colostomy bags.
If Governments across the land including the Fed cannot change and make rational decisions, then the people should force them, even if they fight among themselves.
RIGHT!
Get re-elected without the graft!
The people want Washington to change. And if MA., NJ and VA and the tea party are not notice enough that there is a groundswell more sustainable and durable than what swept Obama into office it may be because people are not really looking.
Here is what I learned as a youngster:
HomeEc 101, Day 1, Lesson 1: When you write a check you are spending money. When you do not that money stays in your account.
This also applies to Washington. I know hard to believe!
Dividends to IPO investers ONLY, 0% would be fine in that case,
Stock Appreciation 39% for Stock Trader Appreciation every year. It is income
We can start by cutting the defense budget by about a third, and close some of those 700 bases and getting rid of those planes, that Gates says doesn't work and he doesn't need.
While McConnall is the appeasement monkey to the Koch's tea party, willing now to flip flop on pork spending, he will just take the pork in the form of more defense spending. Ever wonder how all those RED states along the Gulf Coast have such huge military bases and military making weapons?
One of the funniest things I read today was the brand new Repug congressman, demanding where his government SOCIALIZED MEDICINE insurance, since it takes one month to kick in.
Between the appeasement monkey and the demand for government insurance, the fun is already beginning,
http://www.politico.com/news/stories/1110/45181.html ............. Funnnnnneeeeee
Make these parasites and leeches get jobs no matter how menial.
While we're at it, also make them first in line for the de facto economic draft. Let them get a taste of that "volunteer" military. Overseas for a year or more.
Where they can view firsthand the results of the policies their econopath overlords support. Let them experience the true costs-- to American servicepeople, the US deficit, a skewed global economy, the waste of resources, and the horrible impact on locals.