SMRs and AMRs

Saturday, December 01, 2012

Fiscal Cliff: 10 Ways Obama, Congress Could Trim Without New Income Taxes, Entitlement Cuts

HuffPost, Posted: 11/30/2012 7:51 am EST Updated: 11/30/2012 8:55 pm EST

WASHINGTON -- Just about every policy lawmakers are considering for a deal to avert the so-called fiscal cliff would involve either raising individual income taxes, or cutting benefits in Medicare and Social Security. But there are a host of other avenues available for reducing the federal budget deficit that are rarely talked about, despite their mathematical merit.

There's an old axiom in the investment business that applies to the federal government, as well: You have to spend money to make money. Paradoxically, the U.S. fiscal position would likely be better off if the government simply spent more money. When the economy is booming, government spending can easily be wasteful. But when the economy is not meeting its capacity, the government needs to step in to give it a boost, according to several schools of economic thought. At a time when there are more than four job applicants for every job opening, the economy is clearly not meeting the demand for work, and the government can productively step in by spending money to hire people and get things back on track. By boosting long-term economic growth through short-term spending, the government could actually ease the deficit by ponying up money right now.

That's probably not going to happen, because most lawmakers and think-tankers in Washington are more interested in cutting various social insurance programs than in stabilizing the nation's fiscal position. Nevertheless, even if the government abandons the "spend more" approach, there are at least 10 ways to cut the deficit without raising income taxes or slashing important programs for senior citizens.

1. Prison Reform

The U.S. incarcerates its citizens at a rate roughly five times higher than the global average. We have about 5 percent of the world's population, but 25 percent of its prisoners, according to The Economist,. This status quo costs our local, state and federal governments a combined $68 billion a year -- all of which becomes a federal problem during recessions, when states look to Washington for fiscal relief. Over the standard 10-year budget window used in Congress, that's a $680 billion hit to the deficit.

(More here.)

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