white paper for the white house - reducing the debt
TRANSCRIPT
White paper: Reducing the Debt
AHMAD ABDEL-AZIZ, OMAIR
ALAM, BILL BURKEY
Executive Summary
Rising national debt stalls economic progress and limit
investments in infrastructure, education , and technology
New revenue generation, wasteful spending elimination,
and economic standards must be enacted to remain
globally competitive
The growth of inequalities threatens the American dream
of social mobility and life chances
Executive Summary
Take actions to dissuade practices dangerous to economic and environmental prosperity
Present a new, unbiased asset management vehicle to secure market stability and long term economic health
Revise the tax code which favor a few over the many chipping away at entitlements, long term market stability, and employment opportunities.
Increase US global competitiveness and productivity
Recommendation’s
Bring the debt down to 60% of GDP then gradually lower it over time to regain fiscal flexibility
Cut defense spending by $75 Billion and $100 Billion in healthcare spending over the next decade
Reduce tax expenditures by 10% and limit growth and divide proceeds between lower tax rates and deficit reduction
Add over a $1 trillion in new revenue with Carbon Tax and tax on risky financial transaction
Healthcare Savings
Limit Medical Malpractice Torts, $64 Billion in savings
Cost sharing, increase premiums for the well off that a total 35 percent of program costs would be covered
Raise Medicare copayments slightly to make participation more price sensitive with exemptions for the lowest income retirees
Increase the retirement age for Medicare benefits to 68 beginning in 2015 and indexing it for longevity
Medicare Reform
Medicare Commission strengthen the newly created
Independent Payment Advisory Board (IPAB)
Exchange subsidies health reform included subsidies for
individuals purchasing insurance with incomes between
133 percent and 400 percent of the poverty line
We would scale back subsidies for people on the higher
end of the earnings scale
Social Security
Increase in normal retirement age to 67 and then indexing
it to ongoing increases in life expectancy also index the
early retirement age currently set at 62 for longevity
Slower Indexing slow the growth of benefits for medium-
and higher-income earners through “progressive price
indexing”
Fix the CPI change the consumer price index (CPI) measure
used to calculate Social Security benefits (as well as other
federal programs and tax brackets) to better reflect the
effects of inflation on participants
Healthcare SavingsPolicy Savings in 2025
Malpractice Reform $10 Billion
Increase Premiums and
Cost Sharing
$20 Billion
Increase the Retirement
Age
$20 Billion
Expand Medical
Commission
$10 Billion
Reduce Subsidies for Health
Exchange
$40 Billion
Total $110 Billion
Defense Savings
Weapon Systems reducing outdated ineffective
and excessively expensive weapons
Reduce the nuclear arsenal significantly reduce
the U.S. arsenal and scale back related delivery
systems
Defense Savings
Cancel unneeded programs E.g. Expeditionary
fighting vehicle, V-22 Osprey, further missile
defense development
Scale back several programs and fleets E.g. Scale back the future combat systems program,
reduce the size of the U.S. Navy
Military Compensation reform
Limit the rate of increase to that prevailing in the civilian
economy
Calculation of civilian-military parity raises should take
into account non-wage compensation E.g. cash
allowances and tax advantages
Controlling costs by reforming Tricare
Contracting reform. Reform procurement system within
DOD
Defense Savings
Policy Savings by 2025
Reduce Weapon Systems $30 Billion
Reform Compensation and
TRICARE
$20 Billion
Contracting Reform $20 Billion
Scale Back Research and
Development Activities
$5 Billion
Total $75 Billion
Tax on Greenhouse Gases
Assess a tax of $16 per ton of carbon, generating revenue of $1.1 Trillion
Phased in on predetermined schedule along the lines of 25% of target price in 1 year, 50% in year 2 and 100% in year 3
Green House Gas Revenue will
Provide credits for renewable energy
Off set social safety net programs
Off set increase in corporate tax rates
Align the U.S. with global standards of emissions and prevent the flight of manufacturing and Developing World industrial advantage
Financial Transaction Tax
A tax levied on a miniscule fee on a estimated
$2.9 trillion of daily financial activity through the
trading of stocks, bonds, and derivatives in U.S.
financial markets, based on our analysis
Makes the most speculative unproductive
trading unprofitable, thus steadying markets and
promoting real investment while raising much-
needed revenues
Financial Transaction Tax
Raise over $50-120 Billion dollars in new revenue
Dissuade increased market volatility and encourage long-term holding of shares and productive investments
Increased market stability, job creation
Increased alignment with the global market as several countries already initiated this tax mitigating flights of capital
Countries with Financial Transaction
Tax
Germany
France
Italy
Spain
Austria
Portugal
Belgium
Estonia
Slovakia
Slovenia
U.S. Sovereign Wealth Fund
Politically independent fund to address growing debt problems
Protection against rising interest rates and possible changing to international reserve currency status
Wise investments could be purchased and yield good returns for nationwide improvement projects
Fund would not consist of US Government securities
U.S. Sovereign Wealth Fund
Fund would take the investment burden off of the Fed
and allow it to only make monetary policy
recommendations
Be a source for future funding of all stimulus
Recommendations for the start of such a fund could
come from Social Security or Medicare at an initial
investment of $1 trillion dollars
U.S. Sovereign Wealth Fund Will…
Be more sophisticated stewards of liquidity vs the Fed
bottomless pit policy of bailouts
Possible pension system of the future with focus on long-
term returns and the development of sustainable state
economies
Funds are more likely to be invested in equites to remain
inter generationally viable
New Revenue
Policy Option Estimated Revenue
Carbon Tax $1.1 Trillion (over 10 yrs)
Financial Transaction tax $50-120 Billion
Sovereign Wealth Fund N/A
Tax Expenditures
Reform tax expenditures: targeted, deductions,
exemptions, exclusions and credits
Bring tax expenditure together in a tax
expenditure budget cutting that budget by 10%
and capping growth thereafter
Tax reform policy package
Gradually phase down the home mortgage deduction from $1 million to $500,000 and eliminating the tax break for vacation homes
Phase out the deduction for state and local taxes
Replacing the employer-provided health care exclusion with a flat credit
Tax reform policy package
Consolidating tax breaks for education
Consolidating tax breaks for saving
Eliminating unproductive corporate subsidies
Tax Reform Policy Package
A new strict “PAYGO for tax expenditures” under which no new tax breaks could be added without offsets from that area of the budget
Divide revenues from tax expenditure reform between lowering the deficit and reducing both individual income tax rates
Additionally, we strongly support revenue neutral corporate income tax reform to bring down the corporate tax rate
Political Challenges
In today’s polarized political environment
comprehensive fiscal plan is extremely difficult
The main obstacle to a viable debt reduction plan is
neither economic nor moral, but political
Our plan will require significant budgetary changes,
including wide ranging spending cuts and substantial
revenue increases
Impact of Global Competitiveness
Increased opportunity and life chances
Macroeconomic Stability
Infrastructure
Education and training
Innovation
Conclusion
Innovative ways of enacting economic discipline will generate
sustainable returns and limit moral hazards of markets past
Capital markets can benefit society at large and provide
prosperity for all
Needed cuts to defense and entitlements can be off set by an
unbiased wealth fund for generations to come
US future competitiveness depends on life chances and a
fulfillment of basic needs of education, health, and retirement