Baseline Budgeting & The Negative Income Tax.mp4
Channel: The Philosophical Angle
Date: 23/03/2012

Were You a Presidential Candidate: Eliminating Baseline Budgeting and Instituting the Negative Income Tax System

In the last four years, spending has escalated to more than 24% of GDP, the fourth highest in the years since 1946.  The Wall Street Journal reports that in the current fiscal year 2012, President Obama predicts that spending will increase by $193 billion to $3.8 trillion or about 24% of GDP. 

The Obama budget indicates another deficit of $1.3 trillion in 2012.  Recently, the Obama budget came out for fiscal year 2013. With a proposal of tax increases on the wealthy and defense spending cuts, the budget is a display of the government's intent to take more, spend more; somewhat akin to a spoiled brat. 

Obama and the Democratic Congress has added an astounding $5 trillion in debt in a single presidential term.  National debt held by the public will hit 74% this year and will keep rising. 

How are we, the American people, to get the politicians to reduce the cost of the soaring governmental budget?

In these times of runaway government deficit spending, The Philosophical Angle would like to suggest in this year of a presidential race that a candidate come forth and embrace spending cuts. 

One cut that was suggested by our panelist, Rick Samuelson, was a 10% across-the-board cut be put in place. 

As Rick mentioned, it would cut across all spending and thus slice into everybody's budget equally.  What politician looking to appear fiscally rational not embrace such a recommendation? 

Your host suggested to eliminate the baseline increases that are built into the federal budget resulting in yearly automatic increases no matter if the politicians pass a budget or not. 

Well, The Philosophical Angle has another suggestion for spending cuts: we suggest to the presidential Republican candidates to resurrect Milton Friedman's idea of the Negative Income Tax System as noted in his books, Capitalism and Freedom and Free to Choose.

I can hear your reaction: what's that? you say.  Well to explain. 

Presently, the entire welfare system of the US is run by large governmental bureaucratic departments.  There are many types of welfare which include such programs as food stamps, Medicare, Medicaid, farm supports, child welfare, corporate welfare, housing welfare, unemployment welfare, and on and on. 

Instead of having all these programs run by a host of governmental agencies with their huge bureaucracies - and their huge staffing - they could be consolidated into one U.S. bureaucratic institution that is known to be efficient and effective, called the IRS.

As already required by government, everybody - or almost everybody - must file a return with the IRS. 

The Negative Income Tax would be when an individual's (or an individual and his family's) income (or lack of income) falls below a certain level, the various welfare benefits start to kick in.  And just as somebody who overpays during the year gets a refund from the IRS, so would welfare recipients for whatever reason, whether it be for medical care, housing, food, unemployment, or whatever other welfare programs there are out there.  

Under a proposal of the negative income tax, each person depending on their income level would pay or receive a subsidy.  The rates of subsidy could be graduated just as the rates of taxation are in the current system.  In this way, it would be possible to set a floor below which no man's base income could fall.  

The advantages of this arrangement are clear.  It makes explicit the costs borne by society.  It would reduce government costs by allowing for the downsizing of government.  Whole departments could be eliminated and thus would cost far less then the government is now directly spending. 

Another advantage is that this system of negative income tax is directed specifically at the problem of poverty.  It gives help in the form most useful to the individual, namely cash.  

Overall, it's efficiency would be an advantage in its cost saving to the myriad of governmental welfare systems presently in place.

Host is Chris Angle
Panelists are Mark Brennan and Richard Samuelson