People are sometimes surprised to learn that ideas have consequences. A good example is Ronald Regan’s premise that “deficits don’t matter,” which even fellow Republican George Bush Sr. once called “voodoo economics.” But the idea seemed to work for a while. It grew into a mantra. Indeed it almost seemed like it would go on forever. (Maybe deficits really don't matter if you are growing the economy faster than your debts, but financial responsibility has never been the moral imperative of politicians.) The consequences have arrived.

If we are fortunate, we may be in for a deep recession, and if not, then a global currency collapse and subsequent 1930’s style depression. Nobody really knows what’s going to happen, but either way, a period of austerity looms ahead, an experience heretofore unknown to the present generation, brought up on conspicuous consumption and mindless electronic amusements.

During this period, the government will cut spending drastically. But where to start? The following measures should be initiated ASAP. I am sure there are more, but these are a start. 

1.   First on the list would be legislation that Congress can never again vote themselves a pay raise. The voters must approve all future pay raises.  It would send a message that this county belongs to the people- and that the Congress works for us.

2.   A moratorioum on construction of new schools. If politicians say a new school is needed because the roof leaks and the boiler is old, then fix the roof and buy a new boiler. People must rediscover the old adage, “Use it up, wear it out, make it do.”

3.   Last year Isreal received $2.4 Billion and Egypt $1.7 billion in U.S. foreign aid, i.e. borrowed money.  This largesse must end. In fact, the entire foreign aid budget of $20 billion must be cut or eliminated entirely. Perhaps we can give again someday when we have it. Those who fret over any country whom we currently support should consider donating their own money.

4.  The US has the lowest savings rate of any country in the developed world. Is it any wonder? After money runs the gauntlet of taxations, and ends up in a savings account – then they tax the miserly 2% interest it draws. Interest on savings accounts was never taxed until the 1970’s. If they want people to save, don’t penalize them for saving.

5.  About our role as world policeman...  Let’s see if I get this right. We borrow money from China to support over 700 military bases in 130 countries?  When asked about peace and prosperity, Congressman Ron Paul said, “Minding our own business is the best way to achieve it. Not only is it also a whole lot cheaper, but free trade and friendship with other countries benefits all involved.” The military is for the defense of our own borders.

6.  I was surprised to hear Dubya admit that we don’t have much of an energy policy. Note the use of the word “we.” I guess “we” don’t have one because “he” just didn’t get around to establishing one that emphasizes not only production but also conservation, and works toward energy independence as its goal. Oil imports comprise 40% of our national trade deficit, while we produce less oil than we did in 1950. Let’s create tax incentives for fuel efficient cars and alternative energy installations. (Wind power accounts for 20% of Denmark’s electrical generation, 9% of Spain’s, but only 1% of the United States.)  Let’s bring back the solar heat incentives Jimmy Carter’s administration initiated, but were repealed by Regan.

7.  Clean up the projects by giving them away. Senator Jack Kemp had the right idea years ago. Sell low income housing apartments to low income residents. Sell units for ten thousand dollars or less, or even give them away  to residents if need be. We would create taxable property that people have a stake in. Capitalism works best when the largest number of people have their own piece of the pie.

8.  No more unfunded government mandates. If bureaucrats in Washington want us to comply with their whims and caprices, they must send money for implementation.

9.  Reward long term investment and discourage short-term speculation in stocks. Establish pro-rated reductions in capital gains tax at 4% a year down to zero capital gains tax after twenty-five years of ownership.

10.  Investment credits for those companies that refuse to move manufacturing operations offshore.

While the lame duck Dubya treads water waiting for the next New World Order shill to take over and maintain business as usual, they tax and spend and print up money to pay off the deficit. They still think deficits don’t matter. They’ll be saying it when you are working for a buck an hour. The writer, Phillip K. Dick said, “Reality is that which, when you stop believing in it, doesn't go away.”

April 2008