"It’s a terribly hard job to spend a billion dollars and get your money’s worth."
     -- George M. Humphrey, U.S. Treasury Secretary, February 23, 1954.
"According to some estimates, we cannot track $2.3 trillion in transactions."
-- Donald H. Rumsfeld, U.S. Defense Secretary, September 10, 2001.


Some Advice to Democrats (and the Country)
Posted April 24, 2006 | Link

Five months ago, I provided some advice for Republicans, urging them to take the high road and fix the mess that they've created over the past five years. Unfortunately, nothing of the sort has happened. Nobody important has been fired (unless you count the timely resignations of Scott McClellan, Claude Allen, and Gale Norton) and no attempt at reform has been made. It's almost as if the game plan for Republicans was borrowed from the wily penguins in the movie Madagascar: "You didn't see anything."

Since we can't count on the majority party to fix their mess, it's about time we bring back an honored Washington tradition: gridlock! That's right, it's time for us to elect a Democratic majority in Congress this November so that our government can go back to the multi-party logjam that our forefathers envisioned. You can already see what just five years of the single-party approach has done: record debt, no more allies, organized political crime, withering liberties, rampant fundamentalism, and an economic plan guaranteed to return us to the Gilded Age while the bottom 99% feels like we're becoming a third-world country. No more!

All of this is easier said than done, of course. The Democrats, true to form, have spent the last year wondering what they did wrong in 2004 and developing a strategy for 2006 that is, well, I don't know what it is since even their public announcements fail to mention what it is, exactly. I do feel a certain empathy for them, of course, since they have been far too busy feeling pissed off that our decider-in-chief is still on the loose, inexplicably untouched by the impeachment that would have been a slam dunk if responsible people ran our Congress. Nevertheless, I will stand up and describe what they have to do.

For starters, drop all of the issues that aren't staring us in the face right now. Forget about environmental protection and gun control. These issues will all still be here once we fix things. And fix things we must. Otherwise, there won't be an America worth arguing about in 10 years. Here is what we must do today.

The American system of education is pathetic. We spend billions upon billions, only to graduate 12th graders without any useful sense of history, economics, English, math, or even art. Over the next 12-24 months, gut the Department of Education by 90% ($54 billion) and use this money, directly, to fund 2,500 needy school districts (e.g., low test scores, high dropout rates, low teacher pay, etc.) across America by an average of $21.6 million. Put this money into salaries and equipment and tie future grants to performance. Unlike No Child Left Behind, the carrot would actually exist and the stick would, over time, be practically unnecessary.

Our country's economy can theoretically be short-circuited at any moment if the world starts using the Euro as the de facto currency or if the Asian banks stop buying US Treasury notes. Once either of these things happen, your worries about funding your child's college education will be secondary to how you're going to pay off a $300,000 mortgage at 15% when your house is now worth $225,000 (assuming you're still employed). What this really takes is fiscal responsibility and the Democrats happen to have a tiny bit more of this than Republicans. Remember, 70% of our $8 trillion debt was created by Republicans.

What the Democrats have to do is clean house. Trim the budget; demand a surplus at the end of each year; and invest in our future intelligently (e.g., education, infrastructure, etc., not defense). Practically every household in America has the ability to balance their budget; why can't our federal government, with hundreds of financial experts, come close? Every other country is a potential investor in America. Right now, they don't like what they see. Whether you care about their opinion or not is irrelevant. The truth is that we're going to have to clean up our act if we want to continue our basic standard of living.

Quick lesson on global terrorism: Iraq was never a threat to us, Iran will never be a threat to us, North Korea will never be a threat to us, etc. ad infinitum. The United States of America is far too strong to ever fall victim to a small group of radicals half a world away, regardless of whether we organized, trained, armed, and funded them or not. We've committed over $500 billion to fight a War on Terror that is poorly defined, unwinnable, and unaffordable. Did you know that we're essentially borrowing a billion dollars each day from China, Japan, and others just to fight in Iraq? Does that make sense to you? The play here is simple: phase out our involvement in Iraq in 12 months with the constant refrain that any further violent acts there will be at their own hands. Case opened, ruined, and closed.

BTW, in case you're still worried about future attacks, consider this: it takes more than a religious ideology to make a sane person strap explosives to their chest and detonate themselves at someone's wedding. This person clearly has nothing to live for. What the U.S. should be concerned with is not killing that person proactively, but helping to give that person something to live for. Are hydrocarbon-based resources so vital that we cannot simply pay countries like Afghanistan for the rights to build a pipeline through their country and then help them to spend this money on roads, schools, and markets? Instead, must we prop up dictators who treat women worse than animals and cultivate opium for our children to consume, just so we can save a few cents on a gallon of gas? I think not.

I saved the best for last because this is the vehicle to pay for everything. Remember: our country grew like gangbusters when we used to tax the rich at a much higher marginal tax rate than we do now. Between 1945 and 1980, the top rate fluctuated between 70% and 94% and our country still averaged annual GDP growth of 3.1%. From 1981 to 2005, with the top rate cut almost in half (to between 28% and 50%), our country managed to grow its GDP by almost the same average: 3.2%. It's difficult to estimate how much revenue we could generate by creating a more progressive tax system, but it's fair to assume that we could probably increase overall tax revenue by as much as 2% of GDP (about $130 billion).

In addition, the share of taxes paid by corporations has dropped steadily since World War II. Removing corporate loopholes and insisting on their paying a fair share could increase federal income by at least $175 billion. Although the end game might include an even higher tax on business in order to remove the burden on individuals, the truth is that our crumbling pensions and income insurance plans have left us in the lurch, so to speak, when the boomers start retiring in droves next decade. We need to raise taxes now to head this off and avoid an even bigger hit in the 2010-2020 era when the problem will be an order of magnitude harder to solve. The good news is that we can afford to do this. A weighted, progressive increase of around 5% plus a roll-back of Bush's tragic tax cuts to the wealthy can result in a windfall of around $200-250 billion.

Altogether, this would potentially bring over a half-trillion dollars into the treasury. Wisely spent, the U.S. could fix its education problems and stop its ill-advised war on terrorism within a year or two and then address the budget and perhaps campaign finance reform or health insurance problems by the end of the decade. Then, we can worry about those environmental and gun control problems.

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