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Washington: Not Serious About the Deficit

Posted by Larry Doyle on November 30, 2012 6:58 AM |

Where is Pete Peterson when we really need him?

While America is fed a daily diet of fiscal diarrhea from the politicians and their spokesmen, Peterson remains one of the few adults in and around Washington when it comes to the topic of confronting the fiscal cliff and more importantly our fiscal deficit.

“Fiscal diarrhea, LD? Did you really have to go there, especially on a Friday morning?”

Yes, fiscal diarrhea. How else is one to describe the package and remnants left for us recently by Treasury Secretary Tim Geithner, as highlighted in this interview with Bloomberg’s Al Hunt,

In the course of a conversation I had just the other day, I mentioned that I firmly believe many in Washington on both sides of the aisle have no real interest in addressing our “out of control” spending and subsequent fiscal deficit. Geithner and his pals would point to the debt ceiling as a hindrance. Over and above that, I have often heard that even after the debt ceiling debacle of summer 2011 and the resulting credit downgrade of the United States, our borrowing rates have only come down. If that is the case, then why worry about a self-imposed debt ceiling and the deficit?

Well, to that question, I would respond with the same question the Lord posed to Noah, “how long can you tread water?” That is, how long do we want the Federal Reserve to print money to fund our deficit while simultaneously monetizing our debt, devaluing our currency, and ultimately our quality of life. We are well on the way to all of these scenarios playing out.

While the pols will play politics and continue to treat us like that bevy of mushrooms, Peterson continues to bang his drum about this growing problem. In fact, I would more than welcome that we tell the clowns to step aside and allow Peterson to control the reins on these issues.

Pete Peterson is founder and chairman of the Peter G. Peterson Foundation, a nonpartisan organization dedicated to raising awareness of America’s long-term fiscal challenges and promoting solutions to ensure a better economic future. The Foundation works with leading thinkers, policy experts, elected officials, and the public to build support for efforts to put America on a fiscally sustainable path.

What does Peterson think we should do? As stated back in 2010,

Ideally, the country should raise as much government revenue as possible from a progressive consumption tax. Such a tax can be designed so that it won’t overly burden lower-income families but will raise significant revenues and increase our savings rate.

However, given political realities, it is not likely that we could enact a progressive consumption tax that would raise sufficient revenues to meet our needs. Therefore, I would initiate such a tax in conjunction with a simplified income tax (that would have far fewer corporate and individual credits and deductions)—thereby allowing for lower individual and corporate income tax rates.

Finally, we should implement a carbon tax that would reduce our dependence on foreign oil and lending, while improving the environment.

On the spending side, the country needs to address outdated and bloated programs. Why do we spend more on defense than the next 14 countries combined? We should reinstall the tight budget controls that were used successfully in the 1990s, such as caps on discretionary spending and strict pay-as-you-go rules.

Still, the brute fact is that Social Security, Medicare and Medicaid are projected to account for 100% of CBO’s projected long-term growth in spending (other than interest costs). With so many more elderly living much longer than ever, we have to ask: If all of us, including the relatively well off, are on the wagon, who is going to pull it? To meet these trillions of dollars of entitlement obligations, we would need to double federal taxes. Wouldn’t that be generational theft?

In my view, any reforms to these vital programs should include reductions in benefits for better-off Americans, including options such as raising the payroll cap and making wage and price indexing of benefits more progressive. We should also gradually increase the retirement age for the able-bodied and index it to longevity.

So, Barack, John, Tim and others, STEP ASIDE. Let Pete Peterson clean up the diarrhea left by all of you.

Sorry but that was all too necessary.

Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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