Good evening all!
If you did not read yesterday's article, this post will not make sense to you. So, please read yesterday's entry before reading this article (here is the link: http://eaynuf.blogspot.com/p/solution-to-young-americans-current-and.html).
As promised, I will provide a brief outline of my plan to fund the GRP accounts program. Before I can start, let us look at how much I believe it will cost to start our GRP accounts and the federal government's 2011-2012 budget.
According to my estimate (it is a crude estimation, but I believe 10-15% of our total outstanding debt of $930 billion will be sufficient to get our program off and running. I came up with this solution basically by taking the total amount of debt students will pay back and dividing that value by the standard number of years it will take to make those payments). So, let's just say we need about $120 billion (about 15% of outstanding debt) to get this retirement account program started.
Let us turn our attention now to the federal budget. The most instructive explanation of our government's budget can be found here: http://www.usgovernmentspending.com/budget_pie_gs.php.
As we can see at the aforementioned link, the US government's deficit will be well over $1 trillion dollars this fiscal year. The largest expenditures as depicted in the pie chart are defense, healthcare (Medicare and Medicaid payments), pensions (Social Security and government worker pensions), and welfare. These four slices of the budget pie comprise about 79% of the government budget.
(Side note: the alert reader will notice that the pie chart on the website I linked to above seems to be flawed. Specifically, the summation of the percentages of the pie chart only equal 88%. I believe the missing 12% accounts for the funding of government agencies like the FBI, CIA, Department of Justice, etc).
So, let's look at the defense budget first. The defense department's total budget in 2011-2012 will be $925.2 billion. (Interestingly, that amount is very close to the total outstanding student loan debt number I stated yesterday). Anyway, I believe we can cut some significant spending from the defense budget (and actually turn some of it into public profits).
While this may not be popular, I believe we should rent out our overseas bases (currently there are 662, not even including Afghanistan's 411 bases). Operating those bases costs us $42 billion or so annually (http://www.fpif.org/articles/bring_war_dollars_home_by_closing_down_bases?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+FPIF+%28Foreign+Policy+In+Focus+%28All+News%29%29). We can save that amount every year by completely shutting down those bases (sorry South Korea and other allies, but you guys are big boys now and can handle your own crap).
But, if we keep those bases open and rent them to the host country, we can make a profit. If we rent those bases out for a total of $10-20 billion (plus the cost of operating the bases), the government will essentially make and save $50-60 billion annually that can be put towards our GRP accounts.
In addition to this, I believe we can cut more from defense spending. Just cancel the whole war in Iraq thing. It costs us around $5 billion per month ($60 billion per year) and it does not seem to be helping us in any area (giving Middle Easterners freedom, gaining access to oil, increasing goodwill in the region and combating terror).
Another option we can do is a combination of small (but meaningful) cuts in pensions and health care spending. For instance, a total 2% cut from both of those slices of the budget pie will amount in about $30 billion in spending freedom. (I know trying this may be a political death wish, but it really is in the government's interest to get the GRP started as soon as possible, as I pointed out in yesterday's post).
We can also look at cutting funding for welfare programs. A modest 2.5% reduction in welfare spending will free up $10 billion.
Other ideas include 1% taxes on Pigovian goods like cigarettes and soda. Or, we can partially roll back the Bush tax cuts. Those cuts might have cost the federal government $300 billion annually (http://www.csmonitor.com/USA/Politics/2010/1206/What-will-deal-on-Bush-tax-cuts-mean-for-the-federal-deficit). If we partially roll those tax breaks back (say only allow $150 billion in Bush tax cuts) we can totally pay for this program in full (and really rich people will still get pretty nice tax breaks).
In sum, I have provided several different avenues for the Feds to fund this program. It is now up to everyone to pressure our officials and make the GRP a reality.
