The Middle Class and the Deficit

The Democrats in the Senate joined the House Democrats in passing "pay as you go" budget rules. These rules are meant to require the adding of new revenue to cover the cost of a tax cut or a spending increase. That is: you can't cut taxes without making up the revenue and you cannot increase spending without doing the same. Personally, I think the "pay as you go" rule is not only a silly display of faux-fiscal discipline, it imperils economic recovery.

Generally speaking, I am a for fiscal responsibility and only spending what the government takes in. That means, if we cut taxes, we cut spending. Not just non-defense spending either. We cut spending across the board. If we want to spend more on an entitlement, such as Health Care Reform, we either raise taxes or cut spending in another area to achieve a balanced budget. These are good ways of governing in a time of financial stability, and necessary to enable the government to do come to the aid of the People in times of economic crisis.

During times of economic crisis the government needs the flexibility to spend and create a deficit. Government spending does prop up demand in the short term, and proper government spending in the private sector can aid in staving off losses and encouraging growth. There are two ways that the Federal Government could do this immediately, with success. Of course, with pay as you go in place, this becomes more difficult.

1) Offer to refinance every homeowners mortgage at 3% and have the government pay off the difference between the current value of the home and the balance of the loan. This would not require the creation of a state bank. The government would pay off the balance of the mortgage value/home value difference to the bank that holds the mortgage in return for a fixed rate 3% mortgage through that bank. This would finally burst the housing bubble, put more cash in Americans pockets than any tax cut, and recapitalize the banking industry. I am not an economist, but this seems to me to be a potential way of returning cash to the bankers while easing the load on middle America.

2) Fix health care in four ways:
a) End the existence of the pre-existing condition. Simply put, this is an unfair practice that places people who are sick in the position of bearing the burden of health care alone. Insurance aids those who are sick by banking that most people will be well. Those with conditions may face a higher premium, but this would be offset by:

b) A health insurance voucher for each citizen. Every American would receive a voucher amount based on their current income. This voucher would entitle an insurance company to a check from the US Government to help offset the cost of health insurance. In addition, health insurance would no longer be tied to employment, which is bad policy. Every individual would pay for individual plans. Places of employment would be required to offer health insurance vouchers to employees as part of their salary package, which could be turned over to a health insurance company for payment. This would ensure competition because consumers could move to better benefits and lower rates while not being penalized for pre-existing conditions.

This would work along these lines: The average premium for a family in the US is between $6,000 and $12,000. For our sake, let's take $8,000. The government offers $3,000 for the family in the way of a voucher, leaving the employer to contribute any amount negotiated by the employer and employee in a salary and benefits package. The person insured would take their vouchers, buy insurance, and the insurance company would receive checks from the place of work and the government and then bill the individual for the balance on a one year contract.

c) Encourage doctors to enter the general practice field by forgiving all loans from medical school and any undergraduate school for a certain number of doctors to enter the general practice field for 15 years on a state by state basis, with special attention to localities that are under served, such as rural areas.

I do not claim to be an economic genius, but I am curious as to what you think of these ideas and why you might perceive they would work or not work. If you have ideas of how the government should, or should not spend money, feel free to comment and add them below.

Return to the Gallery

It was one year ago today that I posted my last here at the Peanut Gallery. Time flies. Two days later, August was born, and my world went from playback to fast forward. Jessi and I moved to the DC area so I could go to law school. I am currently working full-time in addition to going to night classes. So, I am making a concerted effort to post three times a week, at least. Look for some this weekend. Hope you will stay tuned.