President Obama’s battle with the Republicans about how to avoid the so-called “Fiscal Cliff” is unfortunately more political drama than reality.
First, the U.S. faces no short-term financial crisis relative to those faced by Greece, Spain, Italy, China or Japan, for example.
Second, some of the issues dividing the two political parties are either artificially divisive or lacking insight into how America operates.
Social Security Requires No Changes and Can Easily Be Made Solvent
Social Security is being discussed as if there is a real financial problem. Unlike Medicare, there is neither a short or medium term financial problem confronting Social Security. Further, there is a very simple way to ensure that for the next four generations, or over the next hundred years, Social Security is fully secured and fully funded. If all income from all sources was equally taxed at the present rate, there would be no need to make any future adjustments in Social Security relating to age qualifications or reductions of benefits.
Presently, all income is taxed for purposes of Medicare, but Social Security has an artificial cap of approximately $110,000. No income above $110,000 and no income from dividends or capital gains is taxed for purposes of Social Security. A flat tax rate, which Republicans generally support, if applied to all income, would provide a simple solution. It would end all future debates over the next hundred years on the solvency of Social Security for our children, grandchildren, great grandchildren and great, great grandchildren.
Inefficient U.S. Healthcare Costs Twice that in Other Nations
Medicare is a very different problem from Social Security. It is wholly underfunded. Both sides are correct that major reforms are needed. But, the reforms that are needed are ignored by both sides.
U.S. per capita healthcare costs are close to $9,000. This is more than double those in any European country or Canada. And, they are almost triple those in Japan. Yet, all these nations have far better healthcare systems measured by higher life expectancy, lower infant mortality and more extensive coverage.
The total U.S. healthcare bill this year will be close to $3 trillion. If appropriate reforms were made, consistent with the best practices in Canada or Europe, a minimum of $1 trillion could be saved per year on our nation’s total healthcare costs. Much of that saving would help curtail spiraling Medicare costs.
Diplomacy May Be More Cost-Effective than Bombs
Defense costs are discussed by both parties based on the erroneous assumption that the U.S. is surrounded by a large number of dangerous and often unknown enemies. No other nation has military expenditures based on the assumption that the most effective way to ensure peace is through mounting armament expenses. Most, including small nations, such as the city-state of Singapore, rely on diplomacy. Even Japan, although to a far greater degree threatened by North Korea and China, has defense expenditures that are less than a tenth those of the U.S. (approximately $700 billion for the U.S. and only $55 billion for Japan). In fact, U.S. military costs represent half of the total military cost of all 193 members of the United Nations. Perhaps billions of dollars for diplomacy might be more effective than trillions for super-sophisticated weapons against unknown enemies.
Romney’s $17,000 Cap on Deductions Has Much Merit
During the presidential campaign, Governor Romney proposed capping deductions at $17,000 per family. This would generate over $700 billion in additional revenue over the next decade. And, with rare exceptions, this cap on deductions would only impact the wealthy. This includes limiting deductions for mortgage payments and state and local taxes. (If charitable deductions were also included in the $17,000 maximum allowable deduction, an additional $500 billion would be saved over the next decade.)
And these limitations could actually benefit the vast majority of families. For example, it is quite possible that the estimated $60 billion or more in mortgage deduction savings annually could be used to provide tax credits and subsidies for low-moderate-income homeownership. Presently, over 90% of low-moderate-income families receive no tangible benefits from the mortgage deduction.
Performance for Pay
Lastly, our government is not necessarily too big. And, the problem may not be that we pay our civil servants too much or that we have too many of them. Our government is viewed as too big because we lack an effective national Cost-Cutting Czar who has a clear mandate to compel “Performance for Pay” for any government employee (federal, state or local), who directly and substantially benefits from federal government contributions.
(Faith Bautista & Robert Gnaizda)
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Faith Bautista is the president and CEO for the National Asian American Coalition. Robert Gnaizda is a former State of California Director of Health and general counsel for the National Asian American Coalition.
