The Deficit Can Be Cut. It is All a Question of Will

It annoys me that Republicans argue against elimination of special tax benefits for anyone, calling it a tax increase. Let’s get things straight here: tax increases are things that affect everyone.

The tax code needs to be cleaned up, as do subsidies. It is not the proper place of government to be handing out special favors. If the Republicans want to do what is right they need to trade — eliminate a subsidy/tax break that some of their constituents like in exchange for eliminating a subsidy/tax break that the Democrats like. Rinse, lather, repeat, until we are back to something like the Tax Reform Act of 1986, or better.

Much as I am a libertarian, I would like the government to survive after shrinking considerably. Part of that involves paying debts, unless we are thinking of doing an external default. My but the rest of the world, particularly China, would be hurt by that.

Cutting taxes has a limit, unless one wants to see our entitlement programs end. I’m all for that, but I think it is political suicide, because a large portion of the American public believes in magic — they think that they are entitled to a meager pension and healthcare in their old age, whether the government can afford it or not.

Look, I am for cutting the Defense budget bigtime, because it is offense, not defense; we do not need so much to defend us. Fold Homeland Security into Defense. Also cut Social Security and Medicare — we can’t afford them at the level indicated, but not promised… remember that these programs are statutory and not guaranteed.

After that, go after the discretionary budget, and eliminate whole departments. Why do we need an energy department when prices are beyond control? Why do we need an agriculture department when food prices are high, and likely to remain so?

Education department? Things have gotten worse since its creation — eliminate it. HUD, HHS — great big wastes, eliminate them. Commerce, Treasury, Labor, State, Interior, Transportation, Veterans Affairs — cut them in half, and see how they adapt. Make the Fed shrink by 90% or more… what does it take to do monetary policy?

I have no doubt that this policy would make my house price fall, but it is the right thing to do.

About David Merkel 144 Articles

Affiliation: Finacorp Securities

David J. Merkel, CFA, FSA — From 2003-2007, I was a leading commentator at the excellent investment website RealMoney.com (http://www.RealMoney.com). Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and now I write for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I still contribute to RealMoney, but I have scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After one year of operation, I believe I have achieved that.

In 2008, I became the Chief Economist and Director of Research of Finacorp Securities. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm.

Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life.

I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

Visit: The Aleph Blog

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