GOP Spending Cuts Fuel Readers' Federal Debt Debate

[Editor's Note: Last week we asked readers to share their thoughts on the GOP spending cuts. We received one of the biggest responses ever. Some of those comments are listed below and many more can be found by clicking here. Don't forget to answer next week's Question of the Week, "Are You Bullish or Bearish on Precious Metals?"]

Proposals for how to fix the U.S. government's spiraling federal budget deficit have led to little more than political gridlock and public frustration.

But House Republicans aimed to make progress last week. They released an ambitious 2012 budget plan on April 5, setting the stage for heated debate with Democrats over the best way to pull America out of its debt hole.

House Budget Committee Chairman Rep. Paul D. Ryan, R-WI, said the GOP's main goal is to avoid the national debt crisis America is headed toward.

"This is not the future of a proud and prosperous nation. It is the future of a nation in decline - its best days come and gone," the proposal states.

The GOP budget proposal, called "The Path to Prosperity," cuts $6 trillion in spending over the next decade and aims to balance the budget - excluding interest payments - by 2015.

"We've got to show the country that we can get this situation under control and grow the economy, and that's what we're doing," Ryan said last week. "I can't look my kids and my constituents in the eyes with my conscience being clear and not know that I didn't do everything I could to try and fix this problem before it got out of control."

Here are some key reforms the GOP has proposed to meet its spending cuts goal:

  • Convert Medicare in 2022 into a "premium support system" for Americans, where they can choose from an array of private insurance plans. The U.S. government would pay about the first $15,000 in premiums, with payment amounts varying based on participants' economic and health status.
  • Make Medicaid a block grant program, giving state governors more flexibility with funding.
  • Cut non-security discretionary spending by $79 billion next year by reducing farm subsidies, shrinking the federal work force and streamlining government agencies.
  • Cap government spending as a percentage of gross domestic product to around 20%, down from about 24% now.
  • Repeal U.S. President Barack Obama's healthcare law.
  • Adopt $178 billion in Pentagon cuts, with $100 billion to be reinvested in other defense programs.
  • And cut corporate and personal taxes to a top rate of 25%, down from 35%.

These budget battle developments prompted last week's Money Morning "Question of the Week": What do you think about the GOP's proposed spending cuts? Do you think the budget proposal is good for the country, goes too far, or doesn't do enough? What do you think about the proposed changes for Medicare and Medicaid?

The reader response was one of our biggest ever. Reader comments ranged from support for the GOP spending cuts, to outrage over the U.S. budget woes, to detailed suggestions for what lawmakers should do to fix mounting federal debt. Some of those responses are listed below, with even more reader comments available by clicking here.

Bring On the Cuts

I am a senior, a student of history, libertarian and member of the Tea Party movement, and I strongly support Rep. Paul Ryan's budget plan. Both the Democrats and the Republicans have led us down this road to insolvency by pursuing grand social programs and fighting too many police actions around the globe without paying for either. Both have been funded by borrowing. As all empires ultimately fail, so will ours; it is just a matter of time. Without this plan, it will happen much sooner as our debt will ultimately overwhelm us. The longer we "kick the can down the road," the harder it will become to fix the problem, and the sooner we fall. It is not the time to play politics; it is time for all to work together and for all to make some sacrifices.

Kenneth D.
Coleman, TX

I strongly favor the GOP proposal for budget cuts and hope that they have the intestinal fortitude to stick with this plan.

Doyle A.

Too Corporate-Friendly

I think the GOP is so blindly in favor of corporations and the rich that they make proposals that are ludicrous and harmful to the public. If they are serious about balancing the budget, maybe they should consider the following:

  1. Save billions by ending support for Middle East oil wars.
  1. Support more multilateralism rather than playing the role of the global policeman.
  1. Refuse to hand corporations "no bid" contracts as Halliburton Co. received in Iraq under the Republicans.
  1. Help to improve our import-export balance by cutting subsidies to oil and increasing them for alternative energy sources.
  1. Refuse to be the insurance agency for the nuclear industry (Can you imagine what another Fukushima would do to the budget? So why do Republicans have no difficulty with that kind of subsidy?).
  1. Raise taxes on all income over $1 million regardless of the source.
  1. Rein in off shore tax havens and other forms of tax evasion.
  1. Enact a very small Tobin tax on all stock transactions that could be used to fund our foreign aid commitments, adding to more world stability and fewer overseas wars.
  1. Tighter regulation of financial instruments such as derivatives and credit default swaps so that billions can be saved by not having to stabilize (and subsidize) banks and corporations that are "too big to fail."
  1. Instead of repealing "Obamacare," support "Medicare for All" with immediate savings in the costly bureaucracy involved in dealing with over 1500 different insurance plans.
  1. Hands off Social Security as no one wants to hand Wall Street an opportunity to gamble with our retirement as it did with people's pensions.
  1. Decrease unemployment by using tax savings with programs to rebuild our crumbling infrastructure, encourage energy efficiency and clean up toxic waste sites.

Brook D.

Most of it All Wrong

I must preface my remarks with the knowledge that my niece lives in Rep. Paul Ryan's district. According to her, he has never done anything to help the people; corporations maybe, but not ordinary people.

All the healthcare whether it be Medicaid, Medicare or Obamacare can and should be resolved by scrapping all of it and putting everyone on single-payer healthcare. I am currently on Medicaid and love it! With single payer, it would give the government bargaining power over the pharmaceutical companies to get lower costs for drugs.

Ryan wants to cut non-security discretionary spending. Why not security spending? We don't need TSA shaking us down at airports! We don't need ICE terrifying our kids at schools! He is right about the subsidies to the biggest 10% of farmers (they get 75% of the money). Cutting the Pentagon $178 billion isn't enough, but it is a start. We don't need to invest the savings into more/different defense programs. We need to invest it in renewable energy instead.

And people earning under $20,000 should not have to pay any tax.

So some is good and some is bad, but most of it is done wrong.

Doris K.

Doomed To Fail

I appreciate the efforts of Paul Ryan and others to really cut the federal budget, but I think they are doomed to failure. There are too many constituencies who are determined to protect their particular slice of the pie, without regard to the effects on the country as a whole. And while I agree that entitlement reform is essential, I long ago concluded that we need to look seriously at each agency and department in the government, and reassess whether we really need and can afford their services.

For example, I would legalize drugs and eliminate the Drug Enforcement Agency. Although their budget is only a couple of billion dollars a year or so, when you figure in all the prison population due to possession and use of illegal drugs, the cost of all the agencies and police time spent fighting illegal drugs, the cartels and terrorist organizations that use drug traffic as a primary funding mechanism, etc., my personal estimate is that the war on drugs is costing us over $125 billion per year. End it. Legalize all of them, and tax them. The results couldn't be any worse than what we have now.

Likewise, I would revise the Food and Drug Administration. They could say whether they have approved a particular drug or medical appliance, but would have no enforcement or control over anything. FDA approvals are so expensive that no inexpensive treatments can be cleared through the system, and are one of the primary reasons that medical costs are rising so rapidly.

And so on with every agency.

I don't expect this to happen until things really collapse, because the status quo is so powerful, but possibly, when things simply cannot continue as they have been, maybe we can get a little smarter about what we do and how we do it.

Gordon F.

Taxes: A Necessary Evil

Reallocate military reduction, cut corporate and top individual tax rate to 25%, and privatize Medicare.... Basically it appears to me to not share the hard reality of the change in spending, but another typical tactic to apply all of the cost of reduction to the ones that most need the support and make sure that the money flows to the top few "taxpayers" who are rewarded for their wealth.

Nonetheless, perhaps it is a place to start the conversation which probably all Americans
would like to see; a real one and not just political posturing with a lack of real results. Whether or not we like it, I believe that in the end taxes are what have to pay for the expected services.

When a catastrophic event happens, where do we turn for recovery? The federal government usually is the source of money and resources. Is our intent to destroy the funding in this process and not fund progress? If that is the intent we will continue to loose ground as some other nations continue to grow their economies, improve their infrastructure, and progress toward a greener world. We are spending far too much on war and not focusing on what would turn this around. Jobs (in the United States) are what are needed to end the drain of unemployment and other support structure and even get the taxes on the income funding the services we all desire.

James N.

No Thank You

The GOP plan has a couple of decent features swamped in a mess of gross stupidity. It is reasonable to cut farm subsidies and defense spending - but then they propose to reinvest most of the defense savings in other defense spending!

Justice Oliver Wendell Holmes said that taxes are the price of civilization. Half a century ago, when corporate taxes were 50% and the top marginal income tax rate north of 90% - even though no one really paid that much - deficits weren't a problem. It's when President Reagan cut these tax rates from an already-reduced level compared to JFK's day that the debt ballooned to $1 trillion. Then the Bush administration's madness of instituting a war (on a completely false pretext and whipped-up fear) and lowering, not raising, taxes, has set us on the road to, yes, bankruptcy. But to think we can get out of this mess without raising taxes (think of us, the taxpayers, paying GE to not pay taxes!) is a form of political madness itself.

I'm not against wealth, far from it, but the statistics of income distribution in our country in the last generation are frankly appalling.

So, no thank you to these fanatics: Their 'solutions' will further tear apart an already deeply divided society, and enrich the wealthy and big corporations far beyond anything good for society.

Steve F.
Long Beach, CA

Surely You Jest, GOP

Personally, I think these budget cuts are a joke!

This is what I would do:

  1. Start with Rand Paul's plan abolishing full departments, laying off non-essential government and firing 50% more. Abolish the Fed and go back to the gold standard, to start with. Cut all duplicate programs.
  1. Get rid of all funding of healthcare and Planned Parenthood.
  1. Abolish the IRS and go to a flat/fair tax.
  1. Cut corporate taxes to 18% or 20%.
  1. Turn welfare into job training and make it so people have to work at least 20 hours per week to even get welfare. This would probably cut welfare by 50%.

These Republicans did not stand their ground over fiscal year 2010 so nobody can expect them to do the cuts necessary to lower government. Lowering government means going back to the Calvin Coolidge days - not to 2008 levels!

Melinda O.

Our Leaders Don't Care!

Several months ago after President Obama's address that spoke to spending cuts, I had just quit Jackson Hewitt in disgust after a week of training and about three weeks of attempting to deal with the mass of devious liars who file tax returns through commercial preparers to claim Refundable Tax Credits. I wrote to both senators from Arizona and to Sen. Orrin Hatch and to Rep. Ron Paul outlining my feelings about the abuse of the Refundable Tax Credits that people who don't even pay any tax are receiving because they have earned a few thousand dollars and have bore a few young kids, and how they have learned to milk the system!

Only one of Sen. John McCain's staff even bothered to answer my concern, but completely side-stepped the question with a page of generic garbage about our tax system. So I have been an accountant for 48 years, and from the non-response I received, I have to say our "leaders" not only don't understand, but don't care!

Larry M.
Buckeye, AZ

[Editor's Note: Thanks to all who responded to last week's "Question of the Week" about the GOP spending cuts.

Be sure to answer next week's question: Are you bullish or bearish on precious metals? Are you investing in gold, silver, or any precious metals? What's your favorite way to play - physical, ETFs, mining companies? If you are steering clear of the metals and mining sector, what's your reasoning?

Send your answers to [email protected].!

Is there a topic you want to see covered as a "Question of the Week" feature? Then let us know by e-mailing Money Morning at [email protected]. Make sure to reference "question of the week suggestion" in the subject line. We reserve the right to edit responses for length, grammar and clarity.

Thanks to everyone who took the time to participate - via e-mail or by posting their comments directly on the Money Morning Web site.]

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