Thursday, April 14, 2011

The Battle of the Budget Plans – Which is Best?

15 April 2011
Global American Series

The Battle of the Budget Plans – Which is Best?

Within the last week we have seen two budget plans introduced – one for the GOP
by Rep. Paul Ryan and the plan outlined Wednesday by President Obama. Which is
best for the future of America? That is the topic of this week's Global American
radio Saturday at 9 am Central.

It all boils down to tax revenue and expenditures. Did you know the first U.S.
income tax was instituted by President Lincoln during the Civil War in 1862 –not
1913 as commonly thought? It was a progressive tax: 3% on incomes up to $600, 5%
on incomes over $10,000. It was repealed in 1872. The Supreme Court ruled the
new income tax passed in 1894 unconstitutional. So it remained until 1913 when
the sixteenth amendment was ratified.

Did you know that the highest tax rate during World War I was 77%? During World
War II the highest rate for the richest was 94%. The highest rate in 1982 was
50%. Today it is 35% - yet hedge fund managers only pay 15% - the capital gains
tax rate (their house cleaners pay a higher rate). And for the Afghanistan and
Iraq war what did we do? We CUT taxes, with the top incomes getting the lion's
share and BORROWED money to pay for the wars. It's the first time in our history
we didn't pay for our wars.

That 2001 cut turned Clinton's last budget surplus of $250 billion, which Bush
43 inherited, into an immediate $1.65 TRILLION deficit. That caused our national
debt to double from 2000 - 2008. And when Bush 43 left office in January 2009,
he handled Obama a $1.2 Trillion deficit on the first day of the job, TARP, and
an economy in free-fall. It was a scary time if you recall.

So now what is the best plan going forward to fix our debt problem? Today the
tax burden on wealth is the lowest in 50 years!

Rep. Ryan proposes making the Bush tax cuts permanent. 100% of his plan is
focused on 12% of the budget. Defense spending remains untouched. It converts
Medicare from an open-ended entitlement to a voucher system tied to State block
grants. Seniors would have to pay $6,400 more for insurance. What if the private
insurance premiums go up or doesn't pay for a procedure? Basically it privatizes
Medicare just as baby boomers reach retirement.

The President's proposed plan would do two things: Eliminate the Bush tax cuts
on the top 2%, netting another $1 trillion in income AND cut Medicare costs by,
for example, allowing drug prices to be negotiated down (the 2004 Plan D
prohibited the government from negotiating lower drug prices!) He also put
defense spending on the table – currently the $700 billion/year is more than the
defense budgets of the rest of the 200-county world COMBINED, which should
indicate how bloated it is (especially when it is sitting on the sidelines in
Libya whose leader killed 270 on Pan Am 103 rides around Tripoli laughing). Its
costs aren't covered by taxes. Our military is still marching on borrowed money.
It isn't sustainable unless we have more revenues. How many toys are we willing
to tax ourselves for?

So which budget plan is best for America -- the one that cuts grandma's Medicare
while giving millionaires a better rate than you and me, or the Presidents plan
-- which asks the wealthy to pay their fair share while preserving the Medicare
safety net for Grandma --and us boomers? But we have bigger things to fix.

Did you know that America ranks 52nd (out of 200 countries) in math and science?
And America is 24th in percentage of households with a personal computer? 9th in
college graduates? We give stats on America's global standing. We talk about how
to return America to No. 1. That's important, right?

Tune into the insights on America's future and "the big picture" this Saturday
on Global American radio at 9 am Central time on Business 1110 AM, streamed on and Podcast 24/7 at

Host: Michael Fjetland
Global American Series
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