Well, we got a sneak preview of what the fancy commission thinks we might need to do to cut the deficits and stop the ballooning debt rise. Most of their early notice/sneak peak/trial balloon seems quite tame to us at TheFundamentals but let’s quickly recap some of the suggestions:
• Cut the federal workforce by 10% (not much but, just like the busload of lawyers going over the cliff, a start)
• Increase social security full benefit qualifying age to 69 (grandpa goes back to work; we’re kidding of course, these changes are so far out in the future as to be meaningless)
• 15 cent a gallon gasoline tax (there should be no tax increases, none, before all the spending cuts are implemented)
• Eliminate mortgage interest deduction (not good timing for a crappy real estate market)
• 3 year federal pay freeze (what? How about a pay reduction first of, say, 33 %)
• Means testing for social security recipients (soak the rich; sounds familiar; expect to see a lot of this thinking)
• Medicare cuts (we would encourage starting with benefit reductions for fatties)
• Lower income tax rates (yeah baby)
We support all these suggestions but they will need to be strengthened (cuts implemented and measured before any tax changes; adhere to a strict 3:1 ratio of $3 in realized spending cuts for each $1 in revenues added) in order to accomplish the goal of deficit reduction. None will deal with America’s inability to compete in the world marketplace (see below.) In the meantime, we are not optimistic about the deficit reductions given these early reactions. First, from the lovely NPelosi, who said, “Simply unacceptable.” She sure got the message a few days ago, huh? Now do you see why term limits are an absolute necessity for this republic of ours to survive?
And, from the biggest, fattest whale of them all, Richard Trumka, AFL-CIO president and Obama buddy, “…the deficit commission just told working Americans to “drop dead.” Funny thing about this Trumka guy. His union has been telling American employers and taxpayers to drop dead for decades. Hey Richard, would you accept pay equity between the private and public sector? You union guys are big on pay equity, huh?
We didn’t see some of our earlier suggestions like sell the Grand Canyon and auction off California to the highest (well, any) bidder. If we could merge Mexico and California forming a separate country, we could solve two problems quickly. Doesn’t solve Illinois and New York but it would be a boon for the fence builders. Not as farfetched as you may think. More to the point, here are the things the commission missed that are needed to make America competitive and create lots of jobs:
• Tort reform; litigation and settlement limitations, loser pays; sunset on all legislation with legal penalty provisions. Does not cost a thing; makes America much more competitive; creates a pro business atmosphere which is badly needed for wealth and jobs creation
• Peel back the following protected classes: disability laws; equal pay laws; discrimination laws and any other laws, rules and reporting imposed on employers with less than 1000 employees, going to 5000 employees in three years (we would call this legislation, “Get America back to work law”)
• Eliminate all legislative and bureaucratic support (yes, Arne, that means the department of education) for the following special interest groups: teachers unions and all other public employee unions
• Eliminate all defined benefit pension plans for public employees
• Eliminate all federal funds going to states that do not follow the above guidelines (this small change coupled with the “Get America back to work law” would go a long way to solving America’s job creations problem. We would, however, need to establish a work permit program for the Mexifornia immigrants to work here)
• Reduce by 50% all subsidies to all federal subsidy recipients; follow up with second 50% reduction in 60 days
Do you notice that these changes don't cost anything? They are cutbacks that would send the message to American employers that we want you to build your products here; expand your businesses here, not in Asia or elsewhere; create new jobs, lots of new, good jobs here. Where is the commission to make America competitive? Create jobs? Do you really think Pelosi or Trumka have one clue about how to be competitive or create real jobs?
So, now what? Tune in. Don’t know that much will come from all this bluster. The proposed cuts and changes are minimal, but you can bet the fur will be flying; the lobbyists will be lobbying and the special interests will be buying lots of fancy meals for congress people at those overpriced restaurants. Hey, how about a tax on fancy meals at overpriced restaurants? Their lobby can’t be that strong can it? Richard probably wouldn’t go for that suggestion either.