Federal Government Deficit - How Are We Going to Bridge That Gap?

Some facts:

This fiscal year, (which will end on Sept. 30) the United States government is going to spend $1.4 trillion more than it takes in.  There is a current debate in Washington D.C. about raising the debt limit, and many Republicans are saying no, until the budget is balanced.

How the heck are we going to cut that gap?

President Obama spoke at length about this at a press conference this week - making a point about “corporate jet owners” who he named a total of six times.

Not to worry, Senator Jay Rockefeller, Democrat from West Virginia, has an 18-point plan to bring in more revenue.

• Fight tax abuse by corporations that ship jobs overseas. ($30 billion over 10 years)
• Replace the Corporate Alternative Minimum Tax (AMT) with a baseline 10 percent tax on profits over $25 million a year. (No scoring estimate at this time)
• Eliminate tax breaks for oil companies. ($35 billion over 10 years)
• End special treatment for corporate executives with private jets who currently get to deduct the amount they paid for a plane over five years. ($2 billion over 10 years)
• Eliminate tax loophole for yachts. Some buyers of big yachts have been claiming them as second homes for tax purposes, according to Rockefeller. (Estimate forthcoming)
• Eliminate ethanol subsidies. ($2.4 billion immediately)
• Provide fair and equitable treatment for racehorse owners in line with owners of livestock. Racehorse owners can deduct the full purchase price of a racehorse over three years. ($20 million over three years)
• Close the "Reverse Morris Trust" corporate tax loophole. This tax shelter has been used by corporations seeking to sell unwanted assets without paying taxes on the money they make. ($260 million over 10 years)
• Stop tax inequity among states. State income taxes are deductible from federal tax returns to prevent double taxation, but nine states have no state income taxes. Their residents deduct sales taxes instead. ($5.5 billion this year)
• Crack down on illegal Internet gambling. ($41.8 billion over 10 years)
• End tax cuts for those making more than a quarter of a million dollars, which are set to expire at the end of 2012. ($41 billion right away)
• No new tax cuts for the very wealthy until the deficit is gone. ($400 billion)
• Early return to pre-Bush estate tax levels. ($32 billion right away)
• Require that millionaires and billionaires pay their fair share. ($200 billion over 10 years)
• Level the playing field between income for the wealthy and income for workers by restoring the pre-Bush capital gains rate. ($125 billion over 10 years)
• Cap itemized deductions at 28 percent. ($300 billion over 10 years)
• Repeal tax perks for wealthy families' health savings accounts (HSAs). ($16 billion over 10 years)

Talk to middle class Americans about a temporary soda tax for deficit reduction. Adding just 3 cents to a 12-ounce soda would generate $24 billion in savings over four years. And it would have the added benefit of reducing consumption of sugary drinks that increase health care costs for families down the road, saving $60 billion over 10 years.

So lets add this all up.

 $1.29 trillion over the next 10 years.

That works out to $129 billion in income per year. That is substantial money. 

Let’s just say that the money is added to this year’s deficit.  Now, instead of being $1.4 trillion in the hole, we are now only 1.271 trillion short.

Congratulations, Mr. Rockefeller, You solved about 9.2 percent of the problem. 

Now lets look at how we are gong to take care of the other 90.8 percent. Taxing the rich is not going to solve our problem.  Deep cuts are going to need to be made.  Reforming entitlement spending is going to be a big part of it.  Regardless of what we want government to do, we are not going to solve this problem without a program we like going away - or at least being scaled back considerably. The numbers are just too big.

A good first step is to be honest about the size of the problem. 

Another would be to acknowledge that the “economy” is a lot more than the output of the government.  If the government takes away more from its citizens in the form of taxes, they won’t be spending that money.  Raising taxes won’t make the economy grow.

The Federal Budget is a mess.  Our economy is a mess.  Let’s hope that some grown-ups emerge who can talk straight to us, and have some real solutions.