Budget This

The new proposed Bush budget takes a three prong approach: increase military spending, reduce spending for all other programs, and make sure rich people pay as little taxes as possible while the national debt grows. This budgetary farce actually pretends the debt will be reduced, but the pretense is smoke and mirrors.

Governmental budgeting is strange, because it is always approached politically, with all the chicanery, posturing, turf protecting and then finally negotiation and compromise that politics entails. Advice on how to make a personal budget is largely consistent and straightforward. Start with your monthly income after taxes, deduct fixed expenses such as housing and loan repayments, then deduct for established investment goals (such as emergency, retirement, education and savings funds), and apply what is left to variable expenses, cutting back and tightening in this last area as needed to achieve balance.

It would be better if governmental budgeting was administered by non-political experts, such as is done with the Federal Reserve supervising monetary policy. The Congress and President would still make the final decisions, but the experts would advise and guide the process to gradually reduce the impact of politics and increase the sense of long range commitment and planning. The experts would indicate what fundamental decisions need to be made and honored for the long term, such as under what circumstances the budget should be allowed to be in deficit and what should be done when a surplus is achieved. One simple way to handle the matter of a deficit is to adjust the next budget down accordingly and include an installment payment to make up the deficit. Whenever there is a surplus, it should be applied to building up the emergency fund and repaying any debt that is excessive.

Fundamental philosophical questions need to be resolved and national goals established as inviolable principles. Once established, anyone who advocates violating them should be considered an eccentric or a political charlatan. Below are some of my nominees for goals and principles.

Income should be overwhelmingly derived from a progressive rate income tax. Those at or below a minimum wage type income would pay no tax. Brackets would be based on multiples of the minimum wage, with the tax rate increasing in equal increments up to a top bracket of 50% for income more than ten times the minimum threshold.

Fixed expense should include first making payments to timely discharge debt. Defense, diplomacy, health care and other vital government services would come next and, except for health care professionals, be provided as much as possible by government employees rather than private contractors.

Goals would include building funds for emergencies, education assistance through college or vocational school, providing for additional retirement security needs and savings for occasional enhancement of other programs.

Variable expenses would be funded from what is left over, subject to cost-benefit analysis and auditing of results by the experts. One possible approach would be to have individual States submit prioritized grant requests and to have some formula for apportioning the Federal funds among the States based on the income tax each State generates, with the poorest State being guaranteed a minimum and the better off States sharing on a reverse graduation basis from the minimum.

The word “entitlement” would be banned from any discussion of these matters, except to mean that all Americans are entitled to know that their government will tax them and everyone else fairly, will meet its obligations to repay debt and avoid unnecessary debt, will enable the education, health care and retirement security of all Americans, will wisely invest in the future and will sensibly use any remainder of tax money collected.