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Battle of the Budgets


Since America is on the road to bankruptcy, we've got to make some changes. What would you do?

The Peter G. Peterson Foundation gave $200,000 to six think tanks to write budget proposals. The money went to the conservative American Enterprise Institute and Heritage Foundation; the "liberal" Center for American Progress, Economic Policy Institute and Roosevelt Institute Campus Network; and the Bipartisan Policy Center.

On my next Fox Business show, representatives from most of these think tanks will summarize their proposals, and I'll have the audience pick its favorite. It's a "Battle of the Budgets." The winner will get one of the Emmys I won during my days as a consumer reporter. I know, it's corny, but I produce a TV program. If the subject is budgets, I'll use any gimmick to make it interesting.

The proposals:

The American Enterprise Institute plan would reduce the debt-to-gross-domestic-product ratio to 60 percent. It's 68 percent now.

AEI would preserve most military spending, but cut Social Security by giving every retiree an $850 monthly check and not letting 62- to 65-year-olds collect benefits early. The payroll tax would be eliminated on people 62 and older to encourage them to stay in the workforce. The age for Medicare would rise to 67, and the program would be revamped into a government subsidy for private insurance. AEI would eliminate farm subsidies and the child tax credit. AEI would replace all current taxes with a consumption tax like the "Fair Tax."

The Bipartisan Policy Center plan would cut the debt to about 50 percent of GDP within 25 years. It would freeze military and discretionary spending, require people with incomes over $106,000 to pay more into Social Security and "slightly" reduce benefits for the wealthy. Medicare spending growth would be limited to the GDP increase plus 1 percent. Beneficiaries could move to private plans.

The center would cut the top corporate tax rate from 35 percent to 27 percent and establish a new 6.5 percent "Debt Reduction Sales Tax."

Yikes! A new tax! I'm reminded of Milton Friedman's words: "Nothing is so permanent as a temporary government program."

The Roosevelt Institute claims to reduce our debt to 63 percent of GDP.

The plan would cut spending by ending the Iraq and Afghanistan wars by 2015, but make no cuts in Social Security, Medicare or Medicaid. The institute wants more spending on "domestic investment" — universal preschool, the safety net, transportation and worker retraining. Roosevelt's tax plan would cut corporate rates by 3 percentage points, but create a new "too big to fail" tax on banks and impose a new "financial transactions" tax.

Under the Economic Policy Institute's plan, jointly written with Demos (, our debt would increase to 90 percent of GDP. Military spending would be cut by $960 billion over 10 years. People making over $106,000 would pay more into Social Security, but Medicare and Medicaid would not be touched. The plan calls for $84 billion a year more in discretionary spending than President Obama wants — more for early childhood education, child care, public transit, rural broadband connectivity, and research and development.

EPI and Demos would repeal the George W. Bush tax cuts on high-income people; enact a 50 percent tax on estates worth over $10 million, a financial speculation tax, and a surcharge on top earners; tax capital gains and dividends as ordinary income; and increase the gasoline tax. It's good to hear what liberals would do if they were in power.

Finally, the Heritage Foundation plan is the only one that would actually balance the budget. Federal spending would gradually drop to 18.5 percent of GDP, below the modern average. Heritage would preserve most military spending, but Social Security and Medicare benefits would be phased out for individuals making over $110,000 a year. The eligibility age would rise to 68 and then be indexed to life expectancy.

Heritage would replace all taxes with a simple flat income tax, with deductions remaining for higher education, charitable donations/gifts and mortgage insurance.

As a libertarian, I'm underwhelmed. This year, our government will spend an astounding $3.8 trillion. We need to eliminate entire agencies, departments and missions. None of these think tanks do that.

John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "Give Me a Break" and of "Myth, Lies, and Downright Stupidity." To find out more about John Stossel, visit his site at <a href="" <>></a>. To read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at




10 Comments | Post Comment
I am not an economist, just a normal American who thinks our government has spun out of control. Here is how to solve our budget crisis.
1. Disband DHS, DoEd, HHS, DoE, DoA, DoL, HUD, EPA, ONDCP and the DEA
2. DOD would become DOD
a. All troops overseas sent home and all bases overseas closed.
b. Allies, when requested, could receive US Military assistance in the event of emergencies/crises for no more than 90 days with expeditionary/rapid deployment forces, SOF and Air and Naval Air Power
c. DOD would refocus on controlling the US borders and defending the US from the possibility of invasion
3. Eliminate all subsidies (foreign/domestic)
4. Institute a flat tax or the fair tax
5. Tort reform instituting a loser pay system
6. Move retirement age to 68-70
Comment: #1
Posted by: John Haywood
Wed May 25, 2011 9:11 AM
I am not an accountant either but I have taken a heavy amount of economics and finance courses in graduate school. Additionally, I work in a portion of the government that is not paid for by tax dollars (at least not U.S. tax dollars). Our simple mandate is to operate at zero cost and zero profit to the USG. Our jobs are directly justified by self-generating revenue. How do we do this? We collect adminstrative fees of 1.5 - 3.8% from all our transactions. If a customer does not want to pay the fee, they can choose not to use our service. This is a much fairer option than a graduated pay roll tax.
The only way to be fair, as well as to ensure we only pay for the services the government is performing are user fees and excise taxes. It's the way the highways are paid for, air traffic control is funded, and the post office (stamps). If you don't want to pay for highways--don't drive (or don't buy gas).
Of course altering the way the government collects funds isn't the only answer--we have to cut spending. We have to seriously look at redundant or irrelevant programs. Why do we have a national department of education with a $100B budget (and an additional $20B special expenses budget) when each state has their own education system? Is this a matter of national importance that requires a separate department? Is this why our forefathers established a Union of states that would meet periodically to vote on matters of national interest? Education is important but we are a bit misguided to think we need the Federal government to tell us how to run our schools (and pay them for this direction). Additionally, we have the DEA which employs over 10,000 government workers as well as an arsenal of weaponry and legal staff at an annual cost of $26B. Their purpose: to put people in cages for having an unhealthy lifestyle. The DEA was enacted in 1973 to carry out President Nixon's war on drugs (but not on alcohol or tobacco which kill far higher numbers). As the reality that this war cannot be won sinks in, we pour more and more money into this hole. Other expenses not in the DEA budget are our over full prison systems as well as a sharp increase in privatized prisons. The privatized prisons proffit off sending people to jail and therefore, with the help of prison guard unions, lobby for longer sentences. As it stands now, the United states has 5% of the world's population and 25% of the world's prison population--and we foot the bill.
Comment: #2
Posted by: SpellCzech
Wed May 25, 2011 11:03 AM
As a normal American I think that most of the people in Washington are OVER PAID why don't they take a cut.
The amount of money these people spend on themselves is hideous, I wonder why that is not mentioned.
I would bring all the troops home and defend our borders, no special interst groups would be allowed to influence politicians all senators would only have ONE secretary, the staff that these people employ is outrageous and very gross. Nancy Pelosi and the rest of the Rat Pack ought to stop spending so much money on themselves. Get rid of The Department of Homeland Security its a failure, Departement of Agriculture, Department Of Education, The Federal Reserve , The IRS, Let The American People run the Country, not a bunch of criminals in Washington. Stop All Foreign Aid, And last but not least we do not need that useless body of FREE LOADERS THE UN. Military spending is out of control we spend more then all other countries put together. We are weaker not stronger by exhausting our millitary for a bunch of Corporatist who have taken over this country.
Comment: #3
Posted by: Angela
Thu May 26, 2011 7:54 AM
We need to be cutting departments very much like John above noted. That would include any scientific department that uses the word might, may or could. Science is not a guessing game it is repeatable or not commented on in the first place.
So I would include NASA, Dept of Interior and Dept of Land management. I would cut the EPA and meke their entire budget based on what they collect from violators, not on creating new rules. All of their findings of new "problem substances" should be repeated by at least 2 universities before banning a substance.
FDA could be closed also or altered for approval instead of banning.
We were promised Social Security and Medicaid. We paid for it and the government stole our money. Raise the retirement age but do not cut these programs. Start by killing the Congress/Senate retirements and pass a law that all rules apply to them just like us. Term limits would be nice.
Comment: #4
Posted by: Jeff in Miami
Fri May 27, 2011 1:53 PM
I think Comment #1 is the best way to go. Reading his military policy gave me pause, but I started to think about why we have foreign bases in the first place. It all came after WW2, and stayed because of the cold war. Both of those missions are complete. Our forward bases are no longer justified. We have bombers that routinely take off from US Airfields and bomb international targets. We also have the ability to refuel aircraft in the sky if we need - sending our fighters and other aircraft anywhere in the world necessary.

Please understand - I am former USAF myself. This thought did not sit well with me at first. But the more I think it over, the more it makes total sense.

Regarding the other departments - they're all pretty much outdated. It's time to shut down all of the non-essential federal agencies. All of them!

Oh - and for your bureaucrats out there... don't go thinking you can just slide missions and personnel / departments into other agencies! NO GO! No other agency is allowed to take on the jurisdiction of these axed agencies. No, the FBI is not going to be allowed to have a DEA within! So, just get that out of your mind!
Comment: #5
Posted by: Bryan E. Johnson
Fri May 27, 2011 7:52 PM
I would cut most govt agencies, Like the Dept of Education , Dept of Energy, transportation as well. I would reform Medicaid , No one who isn't a legal American would not be allowed to get welfare, medicais or food stamps or Wic.
To get Welfare you must work or be going to school , If your on welfare and start with 2 children and you continue to have more children your benefits would Not be raised. Those on welfare should be allowed it for a limited time.
Time to cut all Non essential Government agencies . Cut Federal employees pay to match the private sector. Not allow any federal or state worker to be in a Union.
I don't think we should raise taxes but should take away all govt loopholes and substidies Period
No more tax credits for buying electric cars etc. Only a few tax credits should be allowed: Mortgage, Child Care and state tax on your home
I think there should be means tests for those getting Social Security and Medicare. You should be given amounts by what you have , no millionares should get much in entitlements.
Move all our military out of Iraq and Afganistan and put them on our Borders to protect Americans
Stop all Foreign Aid including the UN.
And that's a good start Cut the presidents and all of congressional pay by at least 5 % .
Comment: #6
Posted by: maggie
Fri May 27, 2011 11:20 PM
There is so much wrong going on at the same time it seems like an impossibility to get the US back under some kind of control with its money spending. What if, our government just stopped spending money? Let each state take care of their own population. I wonder how crowded Texas, NYC, and California would become.
That includes Social Security retirees who have other sources of income. I am living proof you can live within social security income. That down from a six-figure income. Being chronically ill is hell on earth. It's not a great life, but it is a life, provided I have medical/prescription help. (I"m not happy that SS denied me 10 years of work history because "someone else supported me".) That would be my dead husband who worked himself to death. I'm not complaining, I'm just saying we ALL have to sacrifice to end the insanity that has spread like a disease in the United States. We are NOT an endless source of money or fix for all that choose to come here legally or illegally and politicians to enter politics and leave office multi-millionaires or even billionaires. Barbara Bush once said she had always lived in government housing. She doesn't now. I can't tolerate statements like that. So blind to the real lives of most Americans.
Stop spending money except for the chronically physically ill and the chronically mentally ill. Let each state sort out its own problems. And when the money we need to operate the country is "in the bank", we can decide if the current politicians are doing us any good. Can you think of any politician who could handle having to control a whole state and be accountable to its resident? That kind of shake up will force every single American to pay attention to which they elect to hold office. Most Americans don't even know who does what and for whom. How can we? There is NO transparentcy in politics. Politicians should be going to jail left and right if only they were exposed enough for the common person to understand what they've done. Once the bottom-line of "everyman" is affected, there will be change. As it is now, our leaders are searching for ways to get around the problems NOT ELIMINATE them. Citizens are thinking that the person who "solves" my mortgage problem is my hero. Only a Band-Aid.
Another thought that makes a lot of sense to me is that political positions should be on the volunteer level. Why are we paying people to promise us stuff and then they turn around and do the opposite to glorify himself or herself with money or fame? WE should be able to bring that person to task and have them answer for their wrong doings in an open court for all to see. What employer would put up with that kind of behavior? Not for long, anyway they'd be out like the trash. Stop holding politicians above everyone else. Promising a politician a set number of years of pay is crazy. They could do nothing and still get paid. Holy crap. Talk about waste.
I love my country. I've sacrificed in my own way to help as much as I can. My precedents did the same. How did we manage to screw up what was suppose to be a reward for being a good person? It's more like the evil are ruling and good people are catching the brunt.
There are countries in this world that don't go to war, they don't have welfare, they don't have drug problems, and that are not overrun by illegals who don't pay their share of taxes but suck the system dry, etc, etc, etc. Can you imagine that place?
I don't even know what it means to be a Republican or Democrat anymore. Does anyone really care?
I'm obviously not a big-brained person, but I have learned to live within my means against odds that no one
could have imagined. I have suffered losses of monetary value and losses of loved ones and still I survive.
If I can do, anyone can.
Comment: #7
Posted by: Sandra O'Connor
Sun May 29, 2011 9:52 AM
MORE TO HELP SOLVE BUDGET CRISIS:1) Require govt. publications to be printed in black and white - with the exception of graphs and "in the red" figures, 2) Drop US business, investment, and personal income taxes to match the average of Mexican, Canadian, Brazilian 'in our own hemisphere' tax rates to restore US competitiveness, 3) No foreign aid until the US balances it budget & never to nations that expand beyond their borders unless they purchase the property, 4) Return troops unless approved by Congress, 5) take a hint from Honduras and add its text in to US Constitution concerning extension of Presidential term in office and removal from office...and remove Presidents or Pres. Candidates who does not provide valid public proof of natural born citizenship to run for Pres., file executive orders, act, spend, tax, and indebt generations, 6) require a review of, impact statement for, and possible suspension of environmental law where appropriate in a recession, 7) generate a mobile anti terrorist task force and 'feet on the ground' for deployment instead of invasions, 8) stop US military protections for Germany, Japan, Taiwan, Korea unless they share cost, 9) permit only equal justice under the law, no opt-outs, no special exemptions, no roads to nowhere.
Comment: #8
Posted by: JSNYC
Fri Jun 3, 2011 9:38 PM
I watched this episode and was particularly shocked at the egregious example of state bigotry demonstrated by 'liberal' judge when he asked if we could trust money to places like 'Mississippi' or Louisiana? Really??!!! The hubris was unbelievable. It made it patently clear that we will not be able to fix any problem at all until we stop seeing each other as caricatures and not as fellow human beings that may disagree but are deserving of respect. That is liberal to conservative and conservative to liberal. But if we are going to look at each other as corrupt or imbecilic or inbred or wacko or whatever epithet we choose to use we shut down constructive brainstorming and negotiations.

I live in the South and am surrounded by people of deep thought and principled character. There are plenty of examples of idiocy to go around even in the 'Yankee' north . So perhaps our judge friend needs to come south and get to know us before he dismiss us so summarily.

BTW, so many suggestions for shutting down the bases and the various departments etc...please figure in the many jobs you will be disbanding before patting yourself on the back for handling the budget. it is a little more complicated than just firing everybody. It is easier than our incompetent representatives are making it but it takes a little more thought than merely close everything.
Comment: #9
Posted by: Terri Mobley
Sun Jun 5, 2011 9:10 PM
I can see one problem in requiring public agencies to support themselves on fees and fines is that it gives them an incentive to find reasons to licence and fine their targets.
Comment: #10
Posted by: partsmom
Wed Jun 8, 2011 11:13 AM
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