One of the key aspects of human efficiency is making decisions based on facts, data, and nonideological logic. In this post, we will briefly return to the budget and look back at the Simpson-Bowles Plan which attempted, in a bipartisan fashion, to fix the debt problem. This plan, officially known as the National Commission on Fiscal Responsibility and Reform was last updated in 2013 but was never implemented because it was voted down by some of the same people who helped develop it.
The plan was developed by both Democrats and Republicans and was designed to appease both, and at least start to make progress in fixing the debt problem. It was not perfect but it was a start.
The plan is best summarized in two articles it included taxing capital gains and dividends as regular income which would impact primarily the wealthiest 10% that own more than 80% of all stocks, raising the gas tax which would also help reduce global warming, cuting military spending, increasing the taxable maximum for Social Security to 90% of all income, again impacting the wealthy the most, and closing tax loopholes. These are all a good start.
When you consider a plan to fix the debt, you also have to consider the other problems that we need to fix: the increasing gap between the wealthy and the poor which is caused primarily by the shift in wealth from employees to shareholders, the declining middle class which is being caused by the same thing, and the expensive healthcare system.
In order to most efficiently fix a problem, you need to also fix other problems at the same time, in other words, kill two birds with one stone.
With taxes on the wealthy at historically low levels, this is the variable that we need to use the most to fix the problem. We need to increase taxes on the wealthy to a level that they have historically been at in the past.
The tax rate on the wealthy was increased from 25% in the 1920’s to around 94% from World War II until about 1960. It was then decreased in stages from 70% to 50% to about 35% in 1990 where it is today. And this does not take into account huge loopholes which means that some pay much less than this rate. Raising the maximum tax rate on the wealthy to at least 50% would have no impact on anyone and would go a long way towards fixing our debt problem.
And with pensions a thing of the past, we must maintain programs like Social Security (with some minor changes) that offer some retirement security for the middle class.
Pew Research polling in 2010/2011 indicated that the American people basically agree with this thinking, stating that:
- 70% think the deficit is a serious problem
- 65% agree that the best way to reduce the deficit is to cut programs and increase taxes
- Most don’t want changes to entitlement programs
- Overall, only 30% approved of the commission’s work and 48% disapproved.
The American people seem to agree that we need more aggressive action but since Simpson-Bowles nothing has happened in Congress and we keep digging the hole deeper and deeper. Eventually, we won’t be able to get out any more.
Next: Health Care