Debt-Reduction On Grand Scale Is Within Reach

Conventional wisdom holds that the congressional supercommittee established by the debt-ceiling deal to propose further deficit reduction will go nowhere. I'm not so sure. There is a grand compromise to be had. It does, however, require precise sequencing. To succeed it must proceed in three stages:

True tax reform that removes loopholes while lowering tax rates is the Holy Grail of social policy. It appeals equally to left and right because, almost uniquely, it promotes both economic efficiency and fairness:

Economic efficiency — because it removes tax dodges that distort capital flows (and thereby diminish productivity) while cutting marginal tax rates (thereby spurring growth). Fairness — because a corrupted tax code with myriad breaks grants deeply unfair advantages to the rich who buy the lobbyists who create the loopholes and buy the lawyers who exploit them.

That is why the 1986 Reagan-Bradley tax reform was such a historic success. It satisfied left and right, promoted efficiency and fairness, and helped launch two decades of almost uninterrupted economic expansion. That agreement took years to hammer out. But today the elements are already laid out by the Simpson-Bowles commission. The supercommittee doesn't have to reinvent the wheel. It simply has to make choices.

Every dollar of revenue raised by stripping out a loophole is to be returned to the citizenry in the form of lower tax rates. Initial revenue neutrality avoids ideological gridlock over tax hikes and ensures transparency during later alterations of that formula.

As far as I'm concerned anyone who suggests tax reform as part of the solution hasn't spent enough time studying the problem.

At some point when you have some free time try this:
Pull up the spreadsheet for "All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items" for 2009. This is the IRS information so it's about as "straight from the horses mouth" as you can get. The spreadsheet can be found here

Multiply the number of returns for everyone with an AGI above $100k by 100. This will give you the amount of money these people could keep if we simply confiscated all income (in thousands) above $100k.

Next, go to the AGI column and total up all the income for everyone who made more than $100k. This is how much income (in thousands) those people made including capital gains and everything.

Now subtract the first number from the second and you get a figure which represents how much tax we could collect if we simply changed the tax rate to zero for everything up to $100k and 100% for everything over $100k.

The figure you should come out with will be just over $2 Trillion.

That's what we'd be able to get if we let all of the "middle class" and the poor completely slide on taxes and took the "wealthy", bent them over and snagged every nickel off of them.

You may notice that even if we did that we'd still be more than $1.5 Trillion short of paying for one years worth of spending.

That scenario is about as "progressive" a tax plan as you can get and it still fails.....fails miserably.

The problem with our budget deficit and the resulting national debt is spending. There is no amount of additional spending that will fix the problem. There is no amount of taxation that will solve the problem.

The ONLY way to fix this problem is to cut spending and to inspire confidence in the markets that all of the hard work and creativity people put into generating wealth won't simply be scooped up and pissed down the drain like it has been for the past 60 years.

Just for grins I ran the numbers to see where we would come out with enough "revenue" and it turns out that even if we confiscated all of the income from everyone who made more than $50k we STILL would be upside down by roughly $200 Billion.

As long as they are not stupid about it.

The Feds haven’t even looked at waste. Bet that there is plenty of fat before they have to cut into meat and bone.

Besides, cutting waste is something that everyone can support.

Lets have an honest, thorough review of all expenditures.

Unfortunately, I don’t see the new debt committee moving in that direction.

It will be a tough job because the accounting is probably a mess. They’ll probably find huge amounts of money “missing.”

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