Think of that poor supercommittee trying to meet its deadline: Rep. Jon Kyl (R-Arizona) and his 11 colleagues wandering around in fuzzy slippers, eyes glazed, their dust wands holstered in their apron strings as they strain to “simply do what each American family must do every month – balance its budget,” as Kyle himself said recently.
This down-home, quaint metaphor has been used by Eric Cantor (R-Virginia), Marcy Kaptur (D-Ohio) and even President Obama. To hear them talk, you'd think the typical American household looked exactly like a sovereign government.
Or course, the typical family doesn't have the luxury of cutting $1.5 trillion from its nut, but never mind. I know what the supercommittee must have gone through. When I was growing up, my father gave my mother a portion of his monthly paycheck so she could buy groceries and a pair of shoes for one of their kids and save a little something for a rainy day. While Mom did the budget, Dad spent that time “working late” in a bar, buying rounds of drinks even though his buddies could well afford their own beer. Many a night, I watched my mom chewing on her pencil, and, if the numbers didn't add up by the time dad bumbled through the door, there'd be hell to pay.
Just like on Capitol Hill.
These days, I handle our household finances in much the same way, letting the kids practice chokeholds in the hall as the turkey slowly burns. Now, as Congress takes up the onerous task of streamlining income and expenses, allow me to share some of mom's helpful hints:
1. Don't foot the boss's bill. Just like my father sometimes paid the bar bill of his bosses, lawmakers routinely allow corporations to write off “club dues” and off-site “meetings.” This lowers the corporate statutory federal income tax rate from 35 percent to the average effective tax rate of 18 percent – or half of what most American families pay. Far worse is that multinationals like Verizon actually reap a negative tax liability. They embroider their federal returns with so many loopholes, a giant like General Electric (GE) can actually rake in $4.7 billion worth of negative taxes and rebates, better known as profit.
If my father had given his bosses such an extravagant gift, mom would have thrown him out of the house. Yet, Congress showers the Fortune 500 with subsidies and gifts every year. Let's stop this practice and make corporations pay full family fare.
Income recovery: $224 billion a year.
2. Stop pretending you're rich. Families today can't afford to pay Neiman Marcus prices for drugs and medical devices they can get at Costco prices. If you're a mom today, you're hunting for the best buy. If you're a business, you haggle for volume discounts. But if you're, say, the US government, you can't negotiate for the lowest prescription drug price.
A sardonically named 2003 law, called the Medicare Modernization Act (emphasis added), expressly prohibits our government from obtaining volume discounts from Big Pharma. Former US comptroller general David Walker called this enactment, “the most fiscally irresponsible piece of legislation since the 1960s.” When Obama threatened to eliminate that program last year, executives at Johnson & Johnson, Pfizer and others cried crocodile tears. Representative Cantor lobbied on their behalf against this cost-saving measure. Even so, the next super-duper committee should eliminate this giveaway, pronto.
Savings: $1.3 trillion over ten years.
3. Lock the back door. When I was a kid, we never went to bed without locking our doors. Yet, one afternoon, while we were out playing, our house got robbed. “That'll teach you to lock up whenever you leave,” the cop told my tearful mother.
If only the officer would repeat that to Uncle Sam. Our federal “family” allows its friends to loot billions of dollars from its house every day, in broad daylight. Remember the $48 billion we gave Lockheed Martin, Halliburton and others to “rebuild” post-war Iraq? Somehow, they lost $12 billion! As my mother used to say at month's end: “Where did all the money go?” Cut the waste and fraud inside our defense, health-care, and other programs and you can save at least $250 billion per year.
4. Make Wall Street Pay Its Way. Families pay 8 percent sales tax on most purchases and services transactions. It's time that speculative traders and Wall Street gamblers pay a financial transaction fee, too. We're not talking about 8 percent; just a mere 0.5 percent, which works out to five bucks per $1,000 trade. That's a cabbie's tip! While a sales tax is levied on tangible products or services, a financial fee impacts only dark, amorphous things that do not build, feed, or shelter anyone – unless you call derivatives and credit default swaps “sturdy” or “nutritious.” Critics claim that such a levy will hurt investors, but really! The United States had a transaction tax for more than 50 years until 1966, and it raised revenues without disrupting the economy. Indeed, the tax was doubled during the Depression, and the stock market not only recovered, it thrived for decades. When the conservative archbishop of Canterbury starts praying for a return of this revenue generator, you know it's time to levy. So, let's treat Wall Street's transactions like we do Main Street's.
Income recovery: $350 billion year.
Add it all up, and you have to say: “Geez Louise! We've recovered $2.1 trillion in savings and income – or 40 percent more than was requested.” Or something like that. If the supercommittee had followed these simple carving hints, we'd have enough breathing room before the next round of threats.
Of course, playing house seems a little silly. The reality is that the complex federal government has as much in common with the typical family household as St. Peter's Square does with the House on Pooh Corner. Let's not pretend that most families can easily increase their salaries, cut their doctors' bills or deliberately impoverish themselves just to please that crazy, dogmatic aunt on The Hill. The analogy wears thin. It also obscures the fact that lawmakers have a number of options to slice our budget while simultaneously raising income.
I'm just not super-hopeful the next crew of hausfraus can cut it.