Subject: Recommendations Comment: The current discussions regarding proposed changes to social security are a very welcomed initial step. However, from what I am hearing, the recommended changes are very small steps relative to the tremendous financial problems this country is going to have to face due not only to Social Security, but also to Medicare and to the continuing growth of interest on our national debt. It is my opinion that since the door was opened by President Bush to simplify the federal tax code, perhaps we should review our total tax system and attempt to address Social Security and Medicare simultaneously. All to often, politicians tend to make legislative, fiscal changes, which do not have a lasting effect and have to be altered repeatedly over time. Social Security and Medicare are good examples of this piecemeal type of legislation. Today the American public are discussing and debating Social Security because the collection of governmental revenues will not be sufficient to fully fund the Social Security payments to future generations, and something has to be changed to fix it. If Social Security is fixed the same way Medicare was fixed to meet the prescription needs of the elderly through new legislation, not only might it be too expensive for this country to afford but also another fix will probably be required. Of course, the above paragraph presumes that there actually exists real funding for current and future beneficiaries. The sad truth is that the current federal deficit is a result of all cumulative federal outlays, which include Social Security and Medicare, exceeding all cumulative federal revenues. The result is that there is not sufficient funding for today’s beneficiaries. I am at a lost that any elected or highly appointed individual in our government states that social security outlays will exceed social security receipts at such and such date. That is very deceptive and only exists on paper. It is time to have an honest dialogue with the American people. Please consider the following suggestion. The President should be required by law to develop an annual budget that includes all anticipated expenditures (outlays) for the new fiscal year. All costs for the country’s defense, including, any and all on-going wars, all Social Security payments, all Medicare, Medicaid, and Veterans Health Care expenses, all discretionary spending, all contingency reserves, and all actuarially planned reserves for future Social Security and Medicare reserves must be estimated. Since this nation also has a current deficit, not only should funding be included for interest on the debt but an estimated amount over the next ten years sufficient to retire the federal deficit. This budget would be presented with all supporting documents, assumptions, and calculations to the Congress for its approval or modifications. While it is true that the President is required to submit the budget to Congress annually, apparently the President is not required to develop a budget that includes all anticipated costs. That should and must change quickly. My suggestion is that each annual budget, submitted by the President, includes a single tax rate for all individual income earners. All individual tax deductions and exemptions would be replaced with a single deduction of twenty thousand dollars ($20,000). No deductions for mortgage interest and property tax, no exemptions for number of people in a household, no other deductions or exemptions except for a single deduction for up to that first 20K of income. All income from all other sources would be taxed at a single flat rate on all additional earnings. Currently, all individuals pay 7.65% of their first 20K for FICA and Medicare. That means an individual who makes $20,000 today pays in $1530 annually plus any income tax that may be withheld. The recommended change is that all individuals who make only $20K or less per year would pay zero ($0) in taxes. Individuals have only two choices for utilization of their disposable income by either spending it or saving (investing) it. If low-income earners were able to keep more of their money, they would have more than just the choice of spending it. Any additional money these folks might gain from this recommendation would be spent. That potentially could have a huge effect on our economy by creating additional demand for goods and services. Demand in the marketplace is what creates new jobs. New jobs would create even more demand and do something very special for our country by growing financially and enlarging our overall tax base. Before most of this income group did not have the choice of saving because living took all of their money. However, under this new system it would give them a chance to save and invest. A national benefit by benefiting the poor would be gained. There would be no need to provide a deduction for home ownership since many of these low-income earners would be able to start saving for their first home. Home ownership is a great benefit, which carries with it the ability to grow equity and therefore, wealth. There is no need to provide a government subsidy relative to mortgage interest and property taxes. The President would submit his best guess of total expenditures for the next fiscal year including debt reduction. Unlike the past, he also would submit an individual tax rate based upon total government outlays plus contingencies and reserve requirements less anticipated corporate income taxes and all other federal receipts divided by total personal income less the $20K exemption per individual. If the President really participates in this process, a fully funded budget will go to Congress. No more deficits, no more interest payments on those deficits, and no more games. When Congress receives the President’s budget request, Congress will be required to test the budget for completeness, accuracy, and the ability to meet this Nation’s obligations to its citizens and the world. Once the budget is approved by Congress and signed off by the President, the American people will be able to hold both the Congress and the President accountable for the tax rate they received (and will be billed) and for the benefits those taxpayers received against that tax rate. The politics of taxation will have changed to one of accountability and not just rhetoric. Fairness, accountability, and progress could be achieved through this type of federal tax system. If the President and the Congress wish to test a system for funding auxiliary Social Security retirement accounts for future generations, I recommend that those accounts be funded through taxes on the employer side. 2%, 3%, 4%, or whatever percent everyone can agree upon is not so important as the need to look at meeting the needs of all Americans, especially the poorest. An arbitrary wage ceiling could be established and employers would contribute (fund) each employee’s account based on maximum earnings and the legislated percentage. This nation already has IRAs and 401ks for those who are able to contribute for their own future. However, the poor in this country need the money they receive just to survive and save for their tomorrow. Any private accounts should be to fund this group’s future and old age in addition to Social Security. I believe this would be an easy sale to the American public. If the above can be moved forward to public debate and consumption, everyone wins especially the politicians who advocate and are willing to fight for this change. The American people become the true one special interest if properly presented. I briefly discussed piecemeal legislation and wish to continue that thought concerning health care in this country. Reading the polls, as I am sure you do, you certainly recognize that health care is a huge issue for the American people. Couple that with the fact that we live in the richest country in the world, it is unimaginable that 45 million fellow Americans do not have health insurance. That usually means that these Americans do not get regular health examinations and hold off on getting medical care until they can no longer wait. Emergency care is the most expensive type of health care and results in additional overcrowding of our emergency rooms. Is this the true standard for American health care? Would this standard be acceptable for any type of delivery system in American business? I believe the answer to both of those questions is obvious. What do you think? What changes to the health care delivery system could be made without additionally raising the cost to the American taxpayer? How do we make any positive changes to this industry without the American public thinking socialism? Currently, our government operates huge health care entitlement programs at a staggering cost to the American people at the state and federal levels. These costs are projected to continue to increase substantially over time. The American people fund Medicare, Medicaid, VA Health Care, and Children’s Health Insurance Program. Unless I reviewed the published numbers incorrectly, at least 95 million citizens currently are provided health care through these combined programs or approximately 35% of our entire population. While not a majority, these Americans are a large enough constituency to say socialism is already a reality in this country. Why not combine all of the above-mentioned programs into one program that not only responds to the health care needs of our most special groups, i.e. seniors, poor, and veterans, but to all Americans? This country is blessed to have so much, but it lacks an efficiently run health care system. Health care delivery should stay in the hands of our doctors and medical professionals, but government should have a role of oversight and funding to insure that all citizens receive quality health care. The actual bureaucracy related to a revised system would go to the individual health insurance carriers, which would process claims and make payments on behalf of their clients through payments they receive from the federal government. Given that private insurance could reduce their current expense of three hundred billion dollars a year ($300B) for advertising and overhead, these companies might find a compelling argument for joining hands with the federal government in providing such a huge and beneficial service for the United States. From where does the funding for a national system of health care come? Talk with employers who provide health care insurance for their employees. Most of these employers would welcome a change from dealing directly with insurance carriers and making payments on their employee’s behalf and dreading the next year’s premium increases. I believe that if properly presented to this nation’s employers, they would be very receptive to the idea of change as long as it did not cost them any additional profits. Working together with the insurance industry, pharmaceuticals, physicians, and employers, I believe the government could provide relief not only for current recipients of governmental medical stipends, but also for all Americans as well as this country’s employers. There are many missing components to the above recommendations, but I believe that you and your colleagues are thoughtful and compassionate Americans who can legislatively fill in many of them. It is my deepest hope that you, at least, give some consideration and proceed to develop the needed legislation that will address the above recommendations and help move this country forward. Thank you for your time and consideration. Sincerely, Ken Warren |