Our government is completely untenable. Signs of this are visible wherever you look. Social Security cannot afford to send us our annual benefit report. The House of Representatives cannot afford to publish bulletins. The Pentagon cannot afford to pay pensions and medical benefits to retired servicemen. NASA is no longer planning a manned flight to Mars.
There are reasons for this failure. For six decades, we have been accumulating a huge public debt (treasury bonds and bonds) and a much larger unofficial debt under social and medical welfare and medical assistance programs for more than one hundred million today's and tomorrow's retirees.
The total government debt (its budget deficit), according to my calculations, is currently $ 211 trillion. The budget deficit is the difference between all forecasted future obligations (including our huge defense spending, massive subsidy programs, as well as interest payments and the principal amount of official debt) and all future taxes.
The data justifying this figure, right from the first hand - the Congressional Budget Office (CBO). The June Alternative Financial Scenario BEEC is nothing more than a Greek-style tragedy. He is, in fact, even worse than the Greek tragedy currently being performed in Athens. Our budget deficit is 14 times our GDP. Greece’s budget deficit is 12 times its GDP, according to Professor Bernd Raffelhüschen from the University of Freiburg.
In other words, from a long-term perspective, the United States is in a worse financial form than Greece. Financial sharks are already circling near Greece, because it is a small and defenseless country, but they will soon sail to us.
To understand the total amount of insolvency of our situation, consider what kind of tax increase or cost reduction is necessary to eliminate the budget deficit. An immediate and permanent 64% increase in all federal revenues or an immediate and permanent 40% reduction of all non-revenue generating federal budget expenditures is needed.
Such adjustments extend far beyond what Congress and the president are considering. Not surprising. They are focused on limiting the growth of only public debt, while ignoring what is happening with the unofficial debt. To understand the extent of their narrow-mindedness, note that the budget deficit, adjusted for inflation, increased by $ 6 trillion last year, while official debt grew only by $ 1 trillion. Consequently, our leaders look only at one sixth of the problem.
As a result of the August crisis associated with raising the ceiling of borrowing, $ 2,5 needs trillions in budget savings over the next ten years. President Obama on Monday announced a plan to reduce debt by $ 3 trillion. All this is just a pittance compared to what is needed to start liquidating the budget deficit.
There is the only way to combat financial turmoil in our economy, which lies through the operating table. Our state is in dire need of open-heart surgery. Such an intervention is called radical, because the situation requires radical measures. But such treatment is much safer compared to the alternative - to close up with adhesive tape and allow the patient to die.
On www.thepurpleplans.org, I provided five radical, but absolutely necessary measures to remedy the situation with tax collection, health care, social security, the financial system and energy policy. Conducted comprehensively, they eliminate the budget deficit with a reserve and will return our economy from the intensive care unit back to the race track.
The action plan is called purple because it should become attractive to both blue democrats and red republicans. If neither side takes these measures, I guarantee that a third party candidate at www.americanselect.org will do so.
The Purple Tax Plan is of particular importance now, given Obama's decision to insist on the abolition of tax breaks made for Bush by the rich, and to levy a new tax on the super rich - those whose income exceeds $ 1 million per year.
The president wants to raise taxes. I can not argue with that. We desperately need much higher incomes and much lower costs. Federal budget revenues, measured as a share of GDP, are comparable to the low post-war level. And the president wants the rich to carry a large share of the tax burden. It is hard to disagree with this. The rich so far got off with only a little blood.
But Republicans want to make sure that tax increases will not mean increased spending. They also worry that high tax rates will impede the work, preservation and creation of jobs by entrepreneurs.
Most of us agree with both the president and the Republicans, which is understandable because they speak without hearing each other. The only thing we really want is a tax system that is simple, transparent, fair and efficient. Neither the income tax, nor the income tax, nor the property tax, nor the gift tax, meet these criteria. Each is an even greater nightmare than the previous one.
The Violet Tax Plan is a radical operational intervention. According to him, income tax, income tax, real estate tax and gift tax are eliminated. All of them are replaced by a very progressive 17,5% federal retail sales tax and a benefit on demographic grounds (a monthly payment to each household that is large enough for it to reimburse the poor for their sales tax payments during the month). 17,5% is the nominal interest tax rate. Its effective rate is 15%, since 15 cents for every dollar spent goes on taxes, and 85 cents for goods and services. If 15 is divided by 85, you get 17,5% nominal rate.
If you are a Democrat, then for you the division of sales tax and demographic benefits probably sounds rather regressive. But this is very far from the truth. The taxation of consumption is mathematically identical to the taxation of what is used for consumption, namely its wealth and wages. Warren Buffett could pay well not only 15% of his salary, but also 15% tax on all his wealth, which is currently not taxed.
On the day that the Purple Tax Plan is implemented, Buffett will have the same level of wealth, but the purchasing power of his wealth will fall by 15%, thanks to the 17,5% increase in the value of goods and services. And regardless of whether he spends his wealth on himself or gives his children to spend, the purchasing power of his wealth and income from any accumulated assets will be 15% less.
The Purple Tax Plan makes the payroll tax very progressive by eliminating its ceiling and freeing the first $ 40000 of the employee’s wages from the tax. Finally, the Purple Tax Plan includes the 15% inheritance tax and gifts received in excess of $ 1 million.
Since the payroll tax is levied at a rate close to 15%, the sales tax has an effective rate of 15%, and the inheritance tax rate is 15%, the Violet plan results in a flat tax rate. This is very important for budget discipline. In this case, everyone will know that if Congress spends on something more, then the 15% effective tax rate will have to increase.
The ongoing skirmish between Obama and the Republicans is hiding the real game - all the bigger expenses for themselves and all the bigger debts for our children. This cruel financial experiment on our children must be stopped. The purple plan will allow both sides to declare their victory, save our children, and also bring our economy back to life.