FY 2014 Federal Budget Proposal
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The attached Budget Proposal reflects a review of, and recommendation for FY 2014, the 1,241 programs listed in the President's 2012 Federal Budget Proposal. It includes proposals for Budget Reform, Entitlement Reform, Spending Reform and Tax Reform.
The last two Budget Proposals made by President Obama have failed to obtain a single supporting vote in the House of Representatives or the Senate. If this Proposal is submitted to a vote in Congress, it could hardly do worse.
IntroductionBy law the President of the United States must present to Congress his Budget Proposal in the first week of February each year. Like previous years, President Obama will be late again this year.
Over the last three years the Congress and Administration have managed to spend in excess of $12 trillion dollars, 1) without a budget plan and, 2) while adding over $4 trillion to the National Debt.
The President’s Budget forecast expects GDP to grow much faster over the next 5 years than it has over the last 5 years: 23.46% vs 6.63%. If his spending projections over the next 5 years remain and the GDP only grows as fast as it has, then his future spending will hit 34.69% of GDP.
Budget ReformThe Federal Budget is separated into two parts:
Authorities: Those departments and activities specifically authorized by the Constitution, and;The President's 2012 Budget Proposal allocated $4.79 trillion in spending, over $1 trillion more than the $3.796T the President claimed and the press dutifully reported.
Spending ReformUsing current spending as a baseline and adjusted using three factors: 1) if it has substantially diverged from previous spending levels with no apparent change in responsibilities I returned it to previous levels; 2) if a function had management or supervision responsibilities over programs that were being otherwise cut, I reduced that budget by an approximation of potential savings; 3) if I reduced the responsibilities or scope of the program, the budget allocation was reduced by an amount I considered reasonable.
Future spending growth is limited to projected population growth plus minimal inflation: 1.899%
Each program must justify it's entire budget each year.
Entitlement ReformEntitlement spending is, and has been, rising much faster than inflation for years. With boomers retiring and the economy stagnating the problems with entitlements are just getting worse.
Fastest growing part of the Federal Budget and the least in control (Obamacare will not change but accelerate this), the current debate is whether the government should be paying for lifestyle choices.
Sold as a safety net or supplement to retirement plans, Social Security has become THE retirement plan of millions. The only problem was there was no ‘fund’, no lockbox, no account somewhere with all the social security taxes on deposit.
A number of suggestions have been made, but they all leave the program in place and make three recommendations. Timing and rates vary, but the specifics are:
Third Rail Plan
Tax ReformTax Holiday/Stimulus
On January 1st of the first year: All federal tax collections cease for one year. Consumers would have almost $2 trillion extra to spend and employers would have almost $500 billion for hiring, purchases and investments.
The budget has two components, each will have its own revenue model to support it.
Authorities Revenue Plan
The Federal Government is not a bank or the lender of last resort.
All departmental Inspector General positions eliminated. As Attorney General Holder has proven, even the Justice Department IG is susceptible to political whims, but there is no reason to have 18 IGs doing basically the same job. An IG in the Special Counsel's Office of the Justice Department will provide services.
Working Capital Funds
As the WCF grows it creates a bureaucracy within itself that mimics the problem it was intended to solve and it hides the actual cost of individual programs. The accounts are eliminated.
Associated with WCFs is the idea that Departments within the government pay market rates to the government agencies that provide them services paid for either directly or though the WCFs. If the government is going to mandate that 'market rates' be charged for government to government services, then the markets should be free to compete for the business of providing the services.
If it is time for the United States to grow up, so is it time for everyone else to step up. Withdraw all military from deployments except from the following:
Allow the bankruptcy court to modify first mortgages the same way they modify other loans.
All three parties to a student loan were at fault in creating such a situation: The colleges for tuition increases far beyond inflation or benefit; the lenders for not considering the earning potential of students that accomplish a degree; the students for living and learning on debt that bore no relationship to their future incomes. Allow student loans to be discharged in the managed and supervised process of the bankruptcy court.
SummaryLeaving Medicare and Social Security the way they are now and keeping the rest of the cuts proposed would reduce the deficit, but the long term outlook remains bleak for those programs. And given the nature of the situation this Plan is addressing, NOT changing these programs would be considered a major failure of leadership.
With the budget, spending and entitlement reforms proposed, the FY 2014 Plan
Tracy C. Coyle
Budget Reform1. The Federal Budget has two types of programs, those that are authorized under the Constitution and those that have been authorized by the People's representatives in Congress in response to cries to 'do something'. I classify the first as Authorities and the later as Discretionary.
2. Programs currently within the Authorities side may in fact exceed the Constitutional mandate but some argument COULD be made for them: the Air Force is one such program.
3. Departmental Inspector General programs are terminated. A single Federal Government IG will be managed by the Department of Justice Office of the Special Counsel.
4. Programs currently with the Discretionary side may in fact be necessary for a functional society: nuclear waste disposal programs are one type of such programs.
5. A significant number of 'independent agencies' has grown within the Discretionary side that belong supervised within Authorities. Independent is not a description of a program paid for and managed by the Federal Government.
6. Entitlement programs, which I broadly define as payments or services provided by the Federal Government to individuals either directly or indirectly are all Discretionary programs.
7. Programs that benefit a single state or several closely associated states should be paid for and managed by the state or group of states: the hydro-electric utility services of the West and Pacific Northwest are examples. The Tennessee Valley Authority is another.
8. Budgets are a necessary guide for the management and spending of taxpayer monies. No government program or service should be allowed to function without a written and signed Federal Budget prior to the beginning of the Fiscal Year.
Entitlement Reform1. Housing programs are terminated. If a state needs or wants to provide housing or housing assistance it can do so.
2. Food programs are to be phased out. Only Food Stamps and Child Nutrition programs remain and only for two budget cycles.
3. Medical programs are eliminated and a single annual block grant is provided to the states for assistance to elderly and chronically ill citizens.
4. Social Security presents a separate issue due to the long term planning many people did based on it's presence. Keeping faith with that promise is necessary:
1. A single payment is made from the general revenues to fund the Third Rail Plan:1. Funds are disbursed as originally planned for those 50 and older;2. Funds in excess of expenses are retained in a Third Rail Fund until needed after 2031:
Spending Reform1. Every program must renew it's justification for all allocated spending annually.
2. It is estimated that no program will need funds for continuing activities greater than the growth rate in population and a minimal inflation rate of 1% or less. Therefore spending is not expected to increase annually greater than 1.899% per year for programs retained and continued.
3. Working capital funds are terminated.
4. The use of Funds as a funding mechanism is terminated:
1. Funds associated with terminated programs are sold to state agencies or private non-profit programs;
Tax Reform1. The Authorities and Discretionary components of the Federal Budget will each have it's own taxation/funding mechanism:
1. Authorities programs will be funded by an assessment on each State based on:2. All federal taxes including income (personal and business), excise, premiums and program taxes are terminated as of January 1st the year after passage (called a Tax Holiday Year);1. $15 per person that resides within the state;2. Discretionary programs will be funded by a combination of income tax and national sales tax until such time as Discretionary programs are no longer in the Federal Budget:
3. The Assessment, Flat Tax and National Retail Sales Tax will begin January 1st of the 2nd year after passage;
4. 75% of any annual surplus in revenues will be applied to the National Debt until paid:
1. Once the National Debt is paid, these funds and interest earnings from the Third Rail Fund will be returned to citizens in the form of a rebate check at the end of each calendar year.5. 25% of any annual surplus in revenues will be carried over into the next revenue year;
6. Fees for programs such as Park Fees, Survey Fees and licensing fees will continue:
1. For all retained programs;7. Except as noted above, no assessment rate, income tax rate or retail tax rate can be changed except:
1. By ¾ majorities in both House and Senate;
Government Reform1. Federal employee retirement programs are converted from Defined Benefit to Defined Contribution programs (401k type):
1. Vested employees will have 401k type programs vested with funds from existing Retirement Funds;2. Federal Government mandates are terminated:
1. Current unfunded mandates are recinded;3. With the exceptions note above, all Federal Government spending will be for Federal Government employees and programs. Any program to be managed by the State will be funded by the State.
4. Any new proposed program:
1. Must be approved by 2/3 majorities in both House and Senate;
Foreign Policy Reform1. All foreign aid programs to groups, organizations and non-allied countries is terminated.
2. Terminate participation in world organizations:
1. World Bank;3. Foreign Aid is limited to allies for specific programs associated with their national defense, specifically:
1. Israel;4. Aid programs require annual approval and can not be for recurrent events.
5. Food and health aid are to be by donation only – no monetary support for purchases by foreign entities.
Military Deployments1. Military bases outside the continental United States and it's territories are to be closed and all functions returned to bases within the continental US with the following exceptions:
1. Thule Greenland;2. Afghanistan is to be drawn down as planned.
Policy Initiatives1. Bankruptcy Reform: Make student loans and first mortgage liens modifiable under Bankruptcy supervision.
2. Federal Lending: Terminate all federal lending programs such as student loans and residential mortgages.