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Friday, May 4, 2012

Fiscal Policy program

Bruce asked for one thing I would cut.  I think I will give you more.  In both my proposal and Allen's it was arguable whether what we are proposing is a spending cut or a tax increase.  In what follows I am not going to worry about which is which.
Also there seems to be general agreement that tax increases and spending cuts are not good in times of recession.  Some of these proposals would need to be phased in over time.

1.  (earlier) making healthcare payments by third parties be part of taxable income.

2.  Note the SS increases are based on a (AWG) Average Wage Growth rather than the smaller CPI (Consumer Price Index).  However, the purpose of the increases is to keep up with inflation.  Therefore the CPI is the appropriate one to use.  The difference is less than 1 % per year but would have a large long term benefit.  If it is deemed that that would be too much of a burden on the poor, then make the change only for SS recipients whose SS income is in the 15 to 20 thousand range.

3.  Recognize that our real strength will be economic not military. Do not just cut the military. If possible reduce our military role in the world, then reduce the military expenditures by a corresponding amount.  For example:  Acknowledge China's dominance in SE Asia., Tell Europe that they must pay the entire bill for any continuing American forces in Europe. Find some way to respond to attacks without getting into ground wars (eg drones).

4.  Let the Bush tax cuts expire and raise the top rate a bit from where it was at 39.5%.  Make it more well known that the concept "tax cuts always produce growth" is a myth (which may be valid at higher rates of 70 - 90 percent) and for example Reagan brought the tax rates down only to 50% and things boomed.

5.  Enact  a VAT tax to pay for Medicare and keep those funds separate.

6.  Simplify the tax code, not as a cover to raise money, but out of sense of decency.

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