Tuesday, April 04, 2006

The Concord Coalition and the Budget Deficit

I just attended a breakfast featuring prominent researchers from the Concord Coalition. The group, based in WASHINGTON, is attempting to sensitize the pubic to the impending economic meltdown brought on by the U.S. budget deficit. While the members of the coalition have professed political agnosticism, they clearly speak with a BIG GOVERNMENT bias.

For example, when they cite past successes, they invariably identify the 1990s as a golden era. Despite the fact that federal government spending expanded at unsustainable rates during this period, members of the coalition cite the declining deficit as visible evidence of successful policy. Of course they underplay the negative aspects of the 1993 Clinton tax increase and instead focus on the achievement of a budget surplus in the waning years of the decade. Not surprisingly, when you boil down all of their rhetoric, the Concord Coalition is calling for a cap on spending and tax increases to achieve a balanced budget.

Caps on spending do not work. Let me provide an alternative. Instead, we need draconian spending cuts. First let’s abolish the Veterans Administration and the Department of Education. As a U.S. Navy veteran and a university professor, I judge both departments as, ineffectual, at best. The beneficial portions of both departments could be more effectivly provided by the private sector. For example, veterans with health problems, instead of visiting deadly and costly VA hospitals, could receive vouchers that could be used at private hospitals. Second, abolish the newly enacted prescription drug program. Third, provide incentives to encourage those approaching retirement to delay their retirement date.

Space does not allow me to defend these seemingly heretical positions. However, as long as 15 percent of workers pay for the benefits of federal spending going primarily to the remaining 85 percent, there will be no effective change on the spending side. Instead, marginal tax rates will rise on the rich, and the definition of the rich will be ratcheted down each year until the average worker is included. If this does not occur, or if spending cuts equivalent to my suggestions are not enacted, U.S. citizens will face long-term interest rates that will equal those achieved in the “good old days” when that old fiscal conservative, Jimmy Carter, was in the White House and we had mortgage rates a full 4 percent higher than they are today.


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