We are sponsoring a balanced budget initiative to create awareness about this critical issue. Hopefully, this effort will also create motivation to demand from our political leaders, the same discipline and fiduciary responsibility we have to exercise in managing our own businesses, not-for-profit organizations, and families.
We have posted a summary 2013 budget spreadsheet, along with other historic budget, debt, expenditure, and GDP and national income account data. (All obtainable from the Office of Management and Budget website at http://www.whitehouse.gov/omb/ under its budget and historical table links.)
We would like for everyone to go through the brief exercise (5 steps, outlined under the 2013 Budget tab in the 2013 Budget Spreadsheet linked below) of balancing our budget. We realize it is a summary exercise. It does force thinking about what major areas of the budget need more control and which areas may need to be forgone to return and keep tax rates and national debt to levels which literally will not bankrupt the individual families and businesses which have to pay them.
My (BKS) initial pass at this exercise was to eliminate the "marginal" federal government departments (Science & Tech., Energy, Natural Resources, & Agriculture), then to cut every other department by 25% (including Social Security and Medicare), except defense and international budgets. Commerce & Housing Credit was left alone, only because it "operates" at about break-even since it includes postal revenues and housing payments. Those operations ultimately need to be privatized and out of government perview, in my opinion. Then legitimate (productive in terms of facilitating private enterprise and generating tax revenues, not just costs) "advancement of commerce" programs may be justifiable.
The results of my initial effort at this were that I barely balanced the budget, and left little or nothing for debt paydown or tax reductions. This indicates two things to me, since these were probably not insignificant cuts per anyone's characterizations. First, it indicates the challenge of the problem. Second, it indicates, to me anyway, just how out of control and large the behemoth of government has become.
Now I (BKS) am going to take this initial opportunity to give my editorial opinions regarding some of the major additional issues which come up when trying to seek and propose solutions to our federal deficit and debt spending. All of the types of proposals above will be controversial to someone, especially Social Security and Medicare. But, I already receive annual notices from the Social Security administration that, at current funding levels, I would only receive 75% of what I am currently "eligible" to receive if and when I'm able to retire. That just tells me we're going to have to get there at some point through benefit adjustments, since anything other than that implies continued deficit spending and growth of national debt. That is what I want to avoid.
The fact is that a smaller workforce cannot support the large baby boom retiring workforce at the same level of benefits. The system should have been set up to be funded by individual contributions to accounts ultimately supporting the individual per his contributions at retirement. It was not, and it is going to have to adjust somehow over time. One path could be continuing to cover those that absolutely need and rely on it and weaning the rest of us away from it, unless there is an option to participate on an individually funded basis.
Additionally, what I've heard regarding total insurance premium costs for Medicare patients doesn't strike me as being nearly as low cost as the high deductible Health Savings Account plans. The for profit insurance and healthcare industry is forcing the vast majority of the rest of us into these as the most "affordable" offering. That may or may not be true when total costs are considered. But, the for profit insurance and healthcare industry only has to take care of us when we are least likely to need high cost healthcare, or until we can't afford it anymore. Then, we can be passed onto Medicare, and if we can't afford that all we have to do is spend our entire net worth on that or other frivolities to qualify for the least appealing of all government programs, Medicaid.
This healthcare coverage system does not make economic or compassionate sense either. The industry should have been structured, in my opinion, closely akin to the utility industries which have to serve all customers and in exchange are allowed a reasonable market rate of return on investment required by investors to commit capital. I'm sure there are other solutions, but as long as government is the only entity required to provide service to the likely riskiest patients, it will always be the high cost solution, and may ironically not be affordable to the very people who need it most.
Personally, I am happy to pay for and finance as much as possible, if not all, of my healthcare and retirement benefits. I believe it is more cost effective when individuals are as responsible as possible. I do not, though, at the same time want to continue to be told by our elected officials that they cannot run our country (which is too often now largely just equated with providing these "required" entitlement programs) without increased taxes. I would demand that they be subject to and constrained by our real world, and that they adjust appropriately and responsibly with the public's best interest in their fiduciary hearts. That is, they should not and should not be allowed to spend indefinitely beyond what is received in taxes, to borrow indefinitely, and to not generate a surplus large enough to practically begin paying down our national debt.
This leads to bankruptcy in any other arena. Look around at our foreign counterparts which have tried to take this extreme approach indefinitely. Since it is our country, and we are the owners and taxpayors, we are the ones whch will be bankrupt. Not the government officials, not the foreign lenders which will quit buying our debt (and pray they collect on it), but we the people.
I acknowledge that this is not as easy as misleading constituents into thinking it's possible, and that none of us have to sacrifice. But, they must be wise and brave enough as leaders to know and do what is best, or be replaced as leaders. If we as citizens are not wise and brave enough to prefer a productively structured economy and government instead of high taxes and entitlements, then we deserve what we get.
As you may realize from this "brief" introduction and editorial, I believe this is a serious issue needing improved and continued civilian oversight. It forces us to address priorities, and to make certain that we are not as a society perversely creating government and industry programs which tax productivity and drain net worth to subsidize non-productivity and encourage private wealth destruction. We need to be continually vigilant and proactive regarding this.
We will be posting other sponsor and participant thoughts here over time to gather and present what we believe to be balanced and practical approaches to solutions. This is not happening constructively amongst our elected, and supposed responsible and trusted, officials.
We welcome all thoughts and contributions via email, or mail, or telephone to BKS Investment Services, and will likely be adding other interested sponsor contacts over time. We hope you find this a useful forum and use it to further progress in this endeavor.
Sincerely Yours,
BKS