Over the long 4th of July weekend, I had an opportunity to review an interview (June 30, 2011) between public broadcasting talk show host Charlie Rose and Congressman Ted Coburn (Republican) of Oklahoma. Coburn is one of the Senators in the “Group of 6” (a bipartisan group) which is presently grappling with the economic problems of this country. Here are some of the highlights of the interview:
Not surprisingly, Congressman Coburn concludes we have a crumbling infrastructure, lack political leadership, and perhaps our political system is, both on a state and federal level, so dysfunctional that we may not have the resolve to manage the economic crisis our country is in.
One of the problems we face is that 20% of the US population pays 84% of the taxes. Far too many people in this country pay no taxes at all (49% of the population!). The largest components of the economic problem are entitlement programs like Social Security, Medicare, and Medicaid. Because many of the voters pay no taxes, it politically is difficult to wean people away from “free” programs (programs that are free to those who pay no taxes, but cost the rest of the population dearly). Our politicians simply have not addressed these entitlement programs, not because they do not agree that the entitlement programs need to be fixed, but because the political consequences attendant with taking away benefits from voters is “political suicide.” According to Congressman Coburn, the best place to save a significant amount of money is to eliminate all tax credits ($1.1 trillion) and drastically reduce tax deductions. Tax credits misdirect capital investment. Monies are invested not in what is best for the country, but what is best for taxes. By eliminating tax credits, significant savings may be retained without creating new taxes. The investment that will follow the elimination of tax credits will pay significant dividends.
Medicare is another area that needs to be revamped. According to Coburn, the average senior puts in approximately $130,000 in his/her lifetime but takes out $350,000 in Medicare benefits (almost a 3:1 multiplier). That disproportionate ratio has to be changed. Social Security, a fund which the government has raided over the years, will have to be supplemented with significant funds ($2.6 trillion over the next 30 years). Congressman Coburn recommends that the Social Security program be converted to a means tested program with the wealthiest taxpayers getting less. The age of Medicare eligibility must also be raised. The bottom line for our nation, according to him, is that in 5 years (by 2016) things have to change because will we not be able to borrow money to fund these bloated social programs anymore. The reality is that we have to get our financial house in order otherwise the international markets will not lend us money in the future. We have to change the social programs to the best programs we can afford—not the best programs that we can leverage the future of this country for. We must make a decision to live within our budgets.
To fail in this endeavor will mean financial repression and the worst tax of all, the devaluation through negative earnings. The most insidious tax is to have everything you own devalued through negative net earnings where inflation is greater than the net return on investment. That is how governments steal from the middle class and punish the lower classes. Coburn warns about politicians who are doing nothing about tightening their belts and to live within their means. He is critical of politicians who consider their careers more important than this country’s future. There is a lack of leadership, not just from the President of the United States but from the entire US political system; both parties are not prepared to deal with the problem.
By eliminating deductions and tax credits, Congressman Coburn hopes to change behavior to get capital invested and to create jobs which will create wealth and revenue to the federal government.
If we are able to change our country’s current course, our politicians must have the courage to do the right thing regardless of party affiliation. There is no purpose in the politicians serving as representatives of the people if they do not intend or want to solve the present economic problem. To simply make decisions that allow the politicians to remain in power is giving in to the worst of human failings and selfishness rather than to live up to the standards of the drafters of the Declaration of Independence. The founding fathers created a country second to none and whose ideals still ring true today. If the politicians do not change things, the international financial markets will change it for us. If we refuse to deal with our problems (similar to Greece), the rest of the world will have to “solve” the problems for us, not to our liking and much more harshly than if we tackle the problem ourselves now, restoring the nation to the healthy, thriving envy of the world.