Captain Rick: The U.S. Legislature has failed to balance America’s budget almost forever. If it compromised by using the economic common sense rule of 20% of GDP for both revenue and spending, its budget crisis would end and a much brighter future would await the children of our world.

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Record Tax Revenue: I am glad to see we have hit a new record of $2.7T in revenues, just a tick above the previous record of $2.6T in 2007. As population grows, we better hope our tax revenue keeps going up every year. Things went far astray during the ‘Bush War and Tax Cut’ era, the Great Recession that followed and ‘Obamas Record Spending Spree’ to try to fix it, including a reckless 2 point payroll tax cut. Thankfully, it and some other irresponsible tax cuts vanished on Jan 1 as a result of the Fiscal Cliff and helped bring us closer to sanity. Unfortunately this new revenue record leaves America with a very anemic tax revenue of only 16.9% of GDP. The 40 year average is 18%. A healthy economy achieves revenue equal to 20% of GDP…so America is still far short of needed revenue…and part of the reason why America’s finances are in such terrible shape.

Record Spending: The other part of the reason America’s finances are in such terrible shape is because America’s spending is too high. America is currently spending $3.55T or 22.2% of GDP. That percentage is higher than almost every year since 1986. A healthy economy limits  spending equal to 20% of GDP…so America is still far over the limit for spending…the other part of the reason why America’s finances are in such terrible shape.

Republicans, Democrats, Conservatives and Liberals debate: Republicans and conservatives argue that taxes are too high and do not agree to any further increases. They say the entire answer lies in cutting spending. Democrats and liberals argue that spending levels should be held. They say the entire answer lies in tax increases. Its easy for me to see why our legislature is in gridlock. Both sides are stubborn and illogical. Neither side possesses the the solution. The solution resides in compromise. 

Captain Rick’s proposal of compromise: I propose that the U.S. Legislature uses the economical common sense guideline of 20% of GDP as a target for revenue and spending to achieve a balanced budget. 20% has proven to be workable figure for successful governments in the past. The figure can be argued…19 v 21…but 20% is a good starting point. Diminishing America’s national debt is a story for another day. It would require the balance to shift to more revenue and less spending…perhaps 21% of GDP revenue and 19% of GDP spending. Real compromise needs to begin soon … in order to protect the future of our children.  

I welcome your comments, likes, shares and following of my blog! (If not visible, click the red title above)

Info from previous reports:

Fiscal Cliff: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

GDP: https://atridim.wordpress.com/category/gdp/

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Comments
  1. atridim says:

    Thanks Sandi of Arizona for your Facebook post which inspired me to write this report.

  2. SAndi Bartlett says:

    Well Rick when are you running for office. Good suggestions. I tend to side with the Republicans on this one. I actually like the idea of a flat tax. I believe that is fair to all. It would simplify the tax code. Hong Kong has a successful flat rate: http://www.businessinsider.com/america-take-example-on-hong-kongs-simple-and-efficient-flat-tax-2010-7. Now you have something else to write about.

    • atridim says:

      Hi Sandi, thanks for your reply. A flat tax of 15% would probably be more fair than the current system…providing it collects revenue greater than the current measly 16.9% of GDP. We need a plan that will get tax revenue up around 20% of GDP… and just as importantly…reduce spending to 20% of GDP. Both tax revenue and spending need to be equal if America wants to balance the budget. I am honored by our your question…but its not on the radar screen. Meanwhile, I will continue doing my best to educate the multitudes so that they can make better informed decisions in the future.

  3. Jeff Smith says:

    A related issue I find disgraceful is the fact that the US Government does not use Generally Accepted Accounting Principles (GAAP), failing to account for or report off-balance sheet liabilities, i.e., Social Security and Medicare. We routinely hear the government is debt is around 16.5 – 17 trillion dollars, when it is really upwards of $100T! This is pure accounting fraud, and gets executives in the private sector thrown in prison.

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