Deficit and national debt problem, part 2 (UPDATED!)

January 4, 2025
0 comments
Montrose Star
Posted in ELEPHANTS IN THE ROOM
2

By Rick Ehrlich

The largest causes of America’s National debt are:

Excessive Defense Dept. expenses over the past twenty-three years
Unbalanced Entitlement programs whose net costs have ballooned over the same period (see chart)
Drastic tax reductions during (approximately) the past forty-four years

Since 2001, our debt has exploded from $5 trillion to $36 trillion. Approximately, two-thirds can be blamed on military adventures, fraudulent wars, regime change efforts and ‘police of the world’ expenses.

Defense. Is there any reason why our annual defense budget needs to be four to five times larger than China’s? China has four times our population and they spend $250 billion per year compared to our $1.2 trillion to $1.4 trillion. (Our defined defense budget is $900 billion but there are other separate items included in the total). Russia’s budget was $60 billion. The war on Ukraine has pushed that amount to $145 billion. Neither country is a direct threat to the United States. Could the answer be to close all (or part) of our nine hundred foreign military bases? We could safely reduce our defense budget by approximately $1 trillion per year.

Entitlement excess. Among the entitlements, the largest is Social Security which is paid for by employers and employees and is put into a stand-alone trust fund. Largest part is Retirement, which is in balance. However under the umbrella of Social Security are other significant items which are deficit funded, such as Social Security Disability which is an extremely costly item. As of March, 2024, very high income people pay zero SSI Tax on income above $168, 600. Congress needs to take action to raise the cap on Social Security to raise revenues into to the fund. All members of the U.S. Congress make more than $168,600.

Medicare is a large contributor to America’s deficit. It was designed to be one hundred percent self-funded by three trusts:

Payroll Medicare Tax
Medicare tax on employers
Medicare premiums charged to and paid by the Medicare enrollee

In 2023-24, Medicare had only a 2.6% shortage in its many trillions in receipts and expenses, however this small percentage caused ¼ of our annual fiscal deficit! Such imbalance should be an easy fix, but once again Congress is not acting in the interest of the people or the budget.

TAXATION: 3^rd major source of fix

Income Taxation. Taxes on corporations and individuals with high personal incomes are very critical to the financial health of America. People like to think that ‘tax cuts are always good,’ and same with legal tax shelters. Since 1950, our highest incremental tax rate on individuals has dropped from 94% to 37%. Corporate rates have dropped from 52% to 35%. We need to move rates back up, for the good of our country.

Financial changes must come from Democrats and Republicans. The Military Industrial Complex (who fund the lobbyists and think tanks) is the largest culprit in this speeding move to America’s bankruptcy and ruin, but the recent imbalances in Entitlements, and a huge swing to lower Taxation also share in the causes. .

Shouldn’t the biggest, most important national issue be whatever consumes most of the USA’s budget?

Next issue, in part three, we will further examine what might help remedy some of these problems, and what individuals can do to protect themselves against the risks. Stay tuned.