To restore credibility, the Congress must go back to $4.5 trillion deficit reduction plan

Posted by Shyam Moondra

If we had a law that automatically suspended the Congressional members without pay on grounds that they irritated the citizens beyond what would be considered normal, then this would be that moment. The failure of the Super Committee to come up with a paltry $1.2 trillion deficit reduction plan would be considered a valid trigger for putting the entire Congress on temporary suspension until they came to their senses.

It’s shocking to see how bad things have really gotten in the Congress. Democracy is about finding common ground; if elected officials can't engage in give-and-take, then the government would be at stand still, the problems wouldn’t get solved, and the people would be forced to suffer unnecessarily. The bi-partisan Super Committee knew that it was important to reach an agreement on a deficit reduction plan to avoid economic fallout that could lead us into another recession. Since their announcement last Monday on lack of agreement, the stock market has already declined by 5%. The Super Committee’s colossal failure has dampened the confidence of the investors in the government’s ability to solve major economic problems. Simply put, the Super Committee, and by extension the entire Congress, failed to fulfill its duty to the nation.

The House and Senate members need to put their own re-election or party interests aside and focus on doing what's right for the country. Rich people benefited the most under President George W. Bush, so what’s wrong in asking them to pay more in taxes to help reduce deficit? The deficit is too large to be fixed just by spending cuts; it's imperative that we also raise revenues. We can't cut spending too much at a time when economy is struggling; if we did, it would undoubtedly slowdown the economy and push the unemployment rate into double digits.

President Barack Obama and House Speaker John Boehner must go back to their original $4.5 trillion plan and take it from there. The market and country are looking for a big plan to inspire confidence. A $1.2 trillion plan would not make much difference and it will in fact send a negative message to the markets. I don’t think we can wait for another year to do this after the 2012 election; this issue must be tackled by the current Congress right now.

Here is my 10-point plan that should be considered:

1. Let the Bush tax cuts for the rich people (those who make more than $500,000 a year) expire at the end of 2012, but extend the Bush tax cuts for the rest of the people for four more years. A special temporary income tax surcharge for millionaires and billionaires should also be on the table.

2. Reform the tax code. First, eliminate most deductions for those who are making $500,000 or more. Second, eliminate all tax subsidies given to oil companies, hedge fund managers, drug companies, and rich farmers. Third, close all corporate tax loop-holes and shut-down tax-havens that make it possible for corporations to escape paying their fair share of taxes (when GE pays 0% or Google pays only 2% in taxes, that's not right).

3. Cut the defense budget by at least 10%.

4. Medicaid program is largely wasteful and there is a lot of fraud perpetrated by the service providers and patients. Just give a fixed lump-sum amount to the states and let them manage medical care for the poor. We need to ration this benefit rather than making it an open-ended entitlement.

5. Social Security and Medicare are like insurance polices; the government should not change the terms of those polices mid-stream. If we want to reform these programs, it should be done for those who are just entering the work-force and not for those who already paid into the plans. These programs didn't add to the deficit, so there is no need to make drastic changes for those who are already receiving benefits or those who have already paid the premiums but haven’t yet started receiving benefits. We can make some minor adjustments such as modifying the formula for calculating COLA for SS and slightly increasing the premiums and deductibles for Medicare. However, the eligibility age for benefits for these programs should not be increased.

6. Streamline government structure. Texas Gov. Rick Perry's suggestion to eliminate some agencies is a serious proposal worth exploring. For example, Interior, Energy, and EPA could be combined into one Department.

7. We are falling behind in education, so we need to invest more in that area to remain competitive in the global market place. It's ironic that we are spending more money on building prisons but reducing funding for education; that doesn’t sound like the right prescription for a promising future.

8. Cut down foreign aid budget to bare minimum. We can't afford to keep giving tens of billions of dollars of aid every year to Egypt, Pakistan, Israel, and others, especially at a time of financial crisis at home.

9. Ban pork-barrel spending, earmarks, etc. Most of this spending is wasteful and often done to benefit big campaign contributors, which breeds corruption.

10. Cut salaries and benefits of members/staff of Congress that are way too generous. The country is going through a rough time, so everybody should make sacrifices.

If Obama and Boehner hammer out a plan to reduce deficit by around $4.5 trillion over ten years, it would be viewed as very positive by the financial markets, it would remove uncertainty and thus facilitate new capital spending by corporations, and in a short period of two or three years we would see a vibrant economy with significant job creation. The American people are anxious to see strong leadership from Obama and Boehner and others in the Congress to get this done quickly.

Super-duper Committee up in smoke – Republicans stuck between a rock and a hard place

Posted by Shyam Moondra

When President Barack Obama and House Speaker John Boehner couldn’t agree on a grand deficit reduction plan, which would have reduced deficit by $4.5 trillion over ten years, they kicked the can down to the Senate and House. When Congress couldn’t reach an agreement, they appointed a Super Committee, consisting of six Democrats and six Republicans evenly divided between the Senate and House, to come up with a plan to reduce deficit by $1.2 trillion over ten years which would then be voted up-or-down by the full Congress without any amendments or filibuster. And if they failed to agree on a plan, there would be automatic cuts in discretionary spending worth $1.2 trillion of which about $500 billion would be realized by slashing the defense budget.

As of now, it looks highly unlikely that the Super Committee would agree to any plan. This would represent a colossal failure on the part of Congress that had a record-low approval rating of just 9% going into the Super Committee deliberations. Last time, when Congress failed to agree on the debt ceiling plan, S&P reduced the rating of U.S. government securities from AAA to AA+ and the stock market crashed by over 1,000 points. This time, market may not react that badly because the expectations are so low from this “do nothing” Congress. Everyone knows that it would be a miracle if the Super Committee could somehow wave a magic wand and overcome political gridlock.

Republicans are insisting that the income tax cuts for the rich enacted by President George W. Bush be made permanent, which is, of course, vehemently opposed by Democrats. The Democrats argue that the rich benefited the most under Bush and, therefore, they should also share in the pain of balancing the budget. Republicans’ intransigence on the issue of tax increase is remarkable because an overwhelming majority of the voters, including many Republicans, in fact support the idea of making rich people pay more in taxes to bring down deficit. Unfortunately, many Congressional Republicans signed a pledge to not vote for any tax increases; this pledge was sought by a political organization, Americans for Tax Reform, which is funded mostly by wealthy individuals and foundations. Many Republicans understand that the current level of deficit and debt can’t be reduced just by spending cuts and that some tax increases would be necessary. However, they are afraid to speak up in favor of tax increases because they fear retaliation from Americans for Tax Reform which could jeopardize their chances of getting re-elected. Republicans are indeed stuck between a rock and a hard place.

Now it looks like the tough issues of budget deficit and debt wouldn’t be addressed until after the 2012 election. Republicans have put themselves in a Pandora box – they are resisting tax increases for the rich even in the face of strong support from many of their own constituents. It’s hard to see how Republicans could stand to gain in 2012 from their impractical position. Ultimately, it would now be up to the American people, who would have to vote wisely. In 2012, the voters must elect people who would listen to their constituents, be willing to compromise, and do what is best for the country, even in the face of threats of retaliation from a lobbyist organization.

Does a paltry 9% approval rating render the U.S. Congress as illegitimate?

Posted by Shyam Moondra

The latest CBS News/New York Times opinion poll shows that the approval rating for the U.S. Congress is at an all-time low of just 9%. That means a whopping 91% of the American people don’t trust the Congress’ ability to make the right decisions. Under the democratic systems of many other countries, this level of lack of support for a government would have amounted to a “no confidence” vote and triggered immediate new elections. However, under our constitution, we are stuck with the political gridlock until November, 2012 at which time voters would have to decide who should lead the country going forward, especially in the House of Representatives. Last Sunday, on ABC’s This Week program, when asked to comment on the declining popularity of Congress, House Speaker John Boehner (R) said that Congress always had low approval ratings. Boehner's dismissive attitude seems to suggest that he doesn’t think the views of an overwhelming majority of Americans are all that relevant. And that means the business as usual until the new elections are held in 2012.

In yesterday’s local elections, Republicans suffered severe blows on their core issues. In Ohio, the voters overwhelmingly rejected a law curbing union bargaining rights for public employees. This result may be the first clear indication that voters may be growing disenchanted with the Tea Party-backed Republicans, who have advocated deep spending cuts and opposed tax increases. In Mississippi, the voters rejected a controversial amendment that would have defined life as beginning at conception. This amendment would have made it impossible to get an abortion in the state and hampered the ability to get the morning-after pill or birth control pills that destroy fertilized eggs. Disposing of unused fertilized eggs could also have become illegal, making in vitro fertilization treatments more difficult. These two voting results dealt a blow to the Republican establishment and point to a significant shift in the voter sentiment heading into the 2012 election season.

Just as European welfare state is causing upheaval in Europe, the pro-rich policies in the U.S. are leading to just as disastrous results. The gap between the rich and poor is widening and discontent among the population at large is increasing. In a recent Wall Street Journal poll, 60% of the respondents said that the current structure of the economy favors a small portion of the rich people over the rest of the population. And that is the basis of “Occupy Wall Street” protests that are now spreading across American cities and across continents. The Occupiers are saying that the gap between the rich and poor is real and it's a direct result of Republicans favoring the affluent people, who make generous campaign contributions to Republican candidates. The protesters believe that the future of America lies in making the middle-class, which accounts for two-third of economy, stronger.

Given the shift in the electorate sentiment, the Congress needs to do the following:

• Ban campaign contributions by corporations that are polluting our political system. Big money from big business is drowning out the voice of the ordinary citizens. Through their relentless lobbying efforts, the corrupt corporations are able to win special breaks often at the expense of consumers.

What we have is institutionalized corruption that allows Rep. Paul Ryan (R) to collect close to $1 million in campaign contributions from the insurance industry and then propose to dismantle Medicare forcing all elderly people to buy their insurance from private insurance companies, creating a profit bonanza for the insurers.

• Ban revolving door practices where former members of Congress and/or staff become lobbyists and corrupt our governmental system for personal gain.

• Increase taxes on rich individuals making $500,000 or more a year and impose an absolute minimum income tax rate (e.g., 25%) for all corporate income, including profits from overseas operations (no more off-shore tax havens). Republicans equate higher taxes to big government; however, it’s not a question of big government or small government; it’s a question of fairness. During the last two decades, the rich people and corporations, especially financial institutions through highly leveraged bets, did quite well and paid relatively low taxes (thanks to lower tax rates and tax loop-holes). During this period, the executive compensation went through the roof. So, overall, a relatively small percentage of the population did exceedingly well, while the middle-class and low-income people lost ground. We need to reform the tax code to make it fairer.

• Stop all corporate tax subsidies and special treatments given to oil companies, hedge fund managers, drug companies, and rich farmers.

• Impose limits on how much corporate CEOs can make (as a multiple of the lowest paid employee in the company). Ban golden parachutes accorded to executives, especially to those who were fired for non-performance or those who are retiring.

• Create an environment where corporations are induced to become more ethical via stricter enforcement of the laws against insider trading and manipulation by the SEC, CFTC, Federal Reserve Board, and FDIC.

The sooner we make these fundamental reforms, the better off we would be as a country. If we continue on the current Republican path of favoring the rich, this country will break-apart and we may even see protests turning violent.

President Herman Cain? Have Republican voters gone berserk?

Posted by Shyam Moondra

In recent years, the voting record of Republicans has been mystifying. Here is their track record:

• First, they voted for right-wing ideologues like House Speaker John Boehner and House Majority Leader Eric Cantor who adopted the disastrous policy of “say no” to everything that Democratic President Barack Obama proposed, took inflexible position on the debt issue that resulted in the S&P downgrade of the U.S. government securities, and pursued a strategy of deliberately damaging the economy and driving up the unemployment rate with the expectation that a weakened economy would make it easier for them to win the presidency in 2012.

• Second, Republican voters embraced the members of the toxic Tea Party that openly advocated a default by the government on its debt which would have brought disastrous results for the global economy.

• And now, the Republican voters are rooting for an unlikely candidate, Herman Cain, who is currently leading the pack. Cain, a Black man, has no political experience (he already made several gaffes), has questionable background (recent reports suggest that he engaged in sexual misconduct), and has flip-flopped on the core Republican issue of abortion. And to top all that, in a bizarre campaign ad, his chief-of-staff is shown puffing away on a cigarette.

What the heck is going on? Why are Republican voters being so erratic and nonsensical? Today, the country is in a big fix largely because of how the Republican constituents voted and what the elected Republicans did. President George W. Bush and Republican Congress caused most of the current budget deficit and national debt by spending over $1 trillion on the unnecessary war in Iraq, by handing out $1 trillion worth of unnecessary tax cuts to the rich and tax subsidies to the corporations, and by relaxing regulations that led to the financial crisis requiring close to $1 trillion in bank bailouts.

Here is a winning strategy for Republican voters for the upcoming 2012 elections – exercise good judgment and elect better quality people who would fight for the middle-class and not for the rich campaign contributors. Republicans must elect people who are not hardcore ideologues and who are able to solve people's problems by reaching out to the opponents and making the necessary compromises.