2+2=5: Let's Cut Spending

So if one cuts the budget by about 42% across the board the budget would be balanced. When we include the fact that we cannot cut interest on the debt, we must cut the budget by about 50% if we want to balance it. So that means that if a person right now is getting a Social Security check of $1,000 it becomes $500. If your doctor bill is $500 a month, paid by Medicare, you now have a bill of $250. This means that we will cut Medicaid by 50%. Cut our troop strength by 50%.  50% of FBI agents will be fired. Unemployment benefits will be slashed. This is what people are asking when they ask for a balanced budget.  

So let’s exempt the Military. That is 25% of the budget. So the rest of the budget will be cut then by 75%. Let's look at my previous examples. So that $1,000 Social Security check becomes $250. You heath care expenses are now $375 a month. 75% of FBI agents will be fired.  

So let’s exempt the Military, Social Security, and medical expenses of Government. That means we will need to cut the rest of Government by 200%. You do the math. When Republican Budget Guru Ryan says that current retirees will not be affected, he is lying. 

I ran across this interesting tidbit as I researched George Orwell's 1984 for tomorrow's post. 

The statement "2+2=5,” used to torment Winston Smith during his interrogation, was a Communist party slogan from the second five-year plan, which encouraged fulfillment of the five-year plan in four years. The slogan was seen in electric lights on Moscow house-fronts, billboards, etc.  

The Communist party seized the absurdity and made it into a slogan. I suggest the Republicans do the same. Here is my proposed slogan: "The Democrats think 2+2=6. We Republicans think 2+2=5. We are the better party." I am not comforted.  

While I have personal preferences as to who the next president will be, it may not really matter. A Republican president will raise taxes; a Democratic president will cut spending. Neither of the two major parties is willing to deal with the crisis. In fact one of my fondest hopes is that the candidates are liars. I hope the candidates understand the coming troubles and are saying what they need to say to get elected. My hope is in the dishonesty of the politician. 

Our difficulties which I have been outlining are very severe. We need to cut the budget in ways no one wants. We need to raise taxes, a lot—on everyone.  I wish we had some magical pixie dust to spread over the budget and make everything better. We have no choice. We do not have the money.

Let's Raise Taxes

This picture is making the rounds on Facebook. To balance the budget by raising taxes would require all taxes to go up by 80%. This is not going to happen. The corporate tax rate is already among the highest in the world at 35%. Such a large increase in taxes would mean a tax rate of 65%. The Social Security tax rate is 12.8%. An 80% increase would mean an increase to 23%. The highest marginal tax rate for the income tax is 35%. Such a large increase in taxes would increase the tax rate on that income bracket to 65%.  

What about a Value Added Tax (VAT)?

Canada, for example, gives up about a third of potential revenue by excusing food, drugs, and transportation from the [value added] tax. Even if the United States did the same, a 10 percent tax rate could raise $500 billion a year, according to Eric Toder, an analyst at the Tax Policy Center.  

So in order to raise 1.6 trillion a year, this would require a value added tax of 30%. This would mean that all prices would go up about 35%. Does anyone think this is going to happen? 

I have seen a few examples on the talking head programs of a "rich" person asking for higher taxes. A few percentage points is how one person put it. The ones suggesting this do not understand just how dire things are. When I see this talking point, I laugh. The increase, if it is to solve the problem, must be much, much larger. 

The tax increase that Obama is talking about is minimal. If the Republicans were smart—they are not called the stupid party for nothing—they would embrace the rather modest tax increase Obama is suggesting—maybe a bit more. And then cut the budget. This would destroy all Obama's talking points. 

While I support a rather large tax increase with the expiration of the Bush era tax cuts, this will only pay for about 20% of the next 10 years’ deficit.  

Tomorrow I will talk about budget cuts. 

Does Destruction Lead To Economic Growth?

Farage On The Euro Crisis

Here are two interesting clips on the continuing European crisis.

Peak Oil

I think the people who fear us running out of oil forget that coal, of which we have an abundant supply, can replace oil. This is a problem, just not as soon as the alarmists think. As the price of oil goes up, and it will, the price of all goods will increase and substitutes will become economical. 

However, this will lead us to a trying time over the next few decades.