United States – Budget Impasse and Possible Government Shutdown

April 7, 2011

By Padmini Arhant

United States is confronted with many contentious issues.

The disagreement on federal spending, funding for the rest of this year, the deficit, and the FY 2012 budget constitutes the highlight of the political standoff.

There is no doubt that deficit is a major concern not only for the elected officials but also the mainstream taxpayers especially the average citizens forced with tax burden and drastic spending cuts directly affecting vital programs such as health, education and environment protection.

Republican members have always maintained that balancing a budget means targeting essential services to the vulnerable members i.e. children health, youth population dependent on educational grants, senior citizens and veteran affairs without due consideration for the reverse impact on the net output.

Meanwhile, the tax breaks to the wealthiest including estate tax exemption passed during the Bush tax cuts extension in 2010 combined with disproportionate defense expenditure on the ongoing wars in Iraq and Afghanistan which were never even budgeted prior to engagement are contradictory to their objective in containing deficit.

The White House fiscal year 2012 budget and the 2011 federal spending is also based on drastic cuts in domestic discretionary spending expected to cause significant pain in states with budget crisis.

Again the Pentagon spending and corporate tax evasions have not drawn the White House and the conservatives’ attention in the crucial debate.

Otherwise – General Electric, America’s largest corporation having made ($14.2B) $14,200,000,000 in profits last year paid $0 in taxes — that’s right, zero dollars in taxes.

Further GE CEO Jeffrey Immelt ensured his compensation doubled and then diligently concentrated on imposing severe concessions in wages and benefits against 15,000 workers.

Ironically Jeffrey Immelt is the Chair of President Barack Obama’s Council on Jobs and Competitiveness – the coveted status for any Corporate Executive to be in the realm of policy making at the executive branch.

People grievance in this regard is justified – Mr. Immelt assisted his company to evade taxes on its mega profits and subsequent to securing personal compensation double has been pursuing the workers to accept pay cuts – signifying the culture in the corporate dominant political systems.

Citizens petition seeking CEO Jeffrey Immelt to step down and President Barack Obama for Mr. Immelt’s resignation is yet to be obliged much to public frustration.

CEO Jeffrey Immelt position as the Chair of the White House council is evidently in conflict of interest and therefore honoring citizens’ call to quit from the controversial post would be a dignified decision in a democratic setting.

Perhaps the lawmakers’ favoring austerity on the middle and low income America could review their overwhelming generosity in tax breaks facilitating certain corporations and the super rich executives to defraud the current taxation law.

Congressional Democrats particularly the progressives being the only hope for average Americans are hamstrung in their efforts to prevent the intense attacks against the working class.

Social security – the guaranteed safety net for the baby boomers and retirees is another misplaced political maneuver in the fiscal mismanagement.

The latest stopgap measure passed in the House by Republican majority providing a mere week funding instead of the remaining year reflects the lack of seriousness to perform the services pledged on the campaign trail.

Balanced approach and clear rationale is required to overcome the political gridlock contributing to possible government shutdown likely to exacerbate the situation rather than resolving for national benefit.

Congressional members from both parties are urged to set aside their respective political differences and earnestly involve in fruitful discussions to exemplify their commitment to the American electorate.

Representatives are elected to run the government efficiently and not dedicate to the closure for political appeasement.

Besides the House Speaker John Boehner in the tearful moment upon being elected the Republican leader declared the victory as the strong message from the American people to “change course.”

It is poignant to remind the esteemed Speaker John Boehner on the promises made at the emotional hour.

Republican Congressman John Boehner’s statements were:

“The people’s priorities will be our priorities. The people’s agenda will be our agenda.

This is our Pledge to America; this is our pledge to you!

Let’s start right now by recognizing this is not a time for celebration. This is a time to roll up our sleeves and go to work. We can celebrate when small businesses are creating jobs again.”

The status quo could be attributed to politics served more with rhetoric than actions and as for changing direction – it is worth travelling down memory lane when the then Republican House Speaker Newt Gingrich successfully led the Government shut down under the former Democratic President Bill Clinton.

Experimenting old ways for new results might yield self-satisfaction and in this instance to national detriment.

However prolonging the stalemate only confirms the reluctance to ‘Change’ despite the relevance in political stagnancy.

Promoting inaction is not the solution to the burgeoning problem and,

Political leaderships arriving at a consensus through middle ground without marginalizing those struggling to make ends meet or the demography striving hard to revive the economy is instrumental in leading the nation forward.

Spending cuts are vital in the areas that are redundant and destructive to humanity like incessant warfare as well as incentives to energy behemoths indulging in environmental damage.

Contrarily the spending reductions are invariably focused on life saving and prospective investments.

Hence the two substantial avenues to address the federal spending, balancing the budget and deficit control – essentially fiscal responsibility are:

Containing military expenditure with a definitive exit strategy on Iraq, Afghanistan and military bases around the world.

Tax reform to close tax evasion loopholes and tax structure review for fair assessments.

Additionally eliminating wasteful spending i.e. earmarks with the exception of infrastructure improvement in the congressional districts or uplifting social standards producing business and community growth opportunities benefitting all are viable for a meaningful breakthrough in the budget dispute.

It is time to deliver and not deliberate on the government functionality through collective reconciliation of the fiscal matter.

Hopefully all parties will rise to the occasion by recognizing their individual obligation to public and national service without alienating the issues for political purpose.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Featured, International Politics | Leave a Comment 

California State Affairs

May 18, 2009

By Padmini Arhant

Special Election:

Sacramento is struggling with the fiscal budget crisis and dependent on California voters to help the legislators finalize on the tax hikes and spending cuts through ballot measures scheduled on Tuesday, May 19, 2009.

There are important issues on the ballot awaiting voters’ yah or nay that deserve attention.

Proposition 1 A: Controlling state spending, extending temporary taxes 2 years – Yes (due to status quo).

Hard times teach all a lesson to review, reflect and respond to the situation. In the current crisis – the polarization among the majority and minority with the two-third majority vote compliance creates gridlock in the legislative matter. In addition, the deepening state crisis has little room for negotiations, hence requires prudence in the legislations.

Those in favor of spending cuts justified in their position as long as the cuts are not affecting the vulnerable groups like children, elderly, disabled, mentally ill patients and vital programs such as K-12 and community college education. The possible areas for funds diversion or elimination should be the ones that are no longer valuable in revenue or benefit to the community at large. Often, previous budgets might have funding for a particular project or service that might be redundant and need re-evaluation prompting to either replace or discard, as it may be appropriate.

Temporary tax hikes for two years is a reasonable measure to deal with the economic realities including the credit crunch by the service oriented government sector.

Proposition 1B: Restoring $9 billion owed to schools – a resounding Yes.

As stated earlier in the blogposts titled Balancing California Budget and California Budget Deficiencies on this website, it’s improper to classify funding towards education as ‘spending’ rather than ‘investment.’

K-12 and college education is the foundation for any economy. The work force being the engine of the economy dependent on quality education and training essential to succeed in the highly competitive global economy.

Investment in early education and community college as well as state universities is an absolute priority without exception to eliminate socio-economic disparities contributing the related problems…poverty, disease, crime etc.,ultimately affecting the general economy.

Proposition 1 C: Borrowing $5 billion from future lottery profits – Yes (Based on reality).

Prop. 1A principle applies over here. Borrowing funds in the financial market with severe liquidity crisis is a challenge and any available avenue to salvage the budget deficit is a better strategy.

Proposition 1 D: Diverting the money earmarked for children’s services – Positively NO.

Again, the service adequately qualifies as an ‘investment.’ Children are the future and depriving them from programs benefiting their welfare is counterproductive.

Proposition 1 E: Diverting money from care for mentally ill – NO (Not a viable option).

Despite being immoral to marginalize the feeble for the sake of able, expecting positive outcome from diversion is a misconception.

Proposition 1 F: Denying raises to lawmakers, governor – Unequivocally Yes.

Compromises and sacrifices serve the society well during difficult times particularly when it happens from the top bottom rather than the other way around.

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Budget Deficit Reconciliation:

According to news reports, the budget deficit laid out in two scenarios – Ballot measure approval or failure.

Upon approval the deficit stands at $15.4 billion, contrarily the failure would yield a staggering $21.3 billion through mid 2010 and could get worse if the revenue projections do not correlate with actual earnings around that time.

The estimated total budget for the fiscal year starting in July 2009 is $84 billion.

Obviously, the disproportionate combination of revenue loss and investments/expenses yielded a stalemate.

The economic downturn led to the severe loss in tax revenue directly affecting the funding for various services and programs. Meanwhile, the recipients and beneficiaries of the services remain constant or increased since the last budget.

California confronted by the urgent action to resolve the financial crisis. Government organizations are predominantly service sectors engaged in providing public services to the residents of the state, counties and cities. In such atmosphere, the only and perhaps the major source of income is taxes collected from individuals, corporations, levies, fees and other charges that may be applicable on various items.

When the economy slides rapidly as it has since 2007, it drastically affects the income source via taxes. Unfortunately, the percentage of population receiving the services that typically represents investments/expenses, do not always drop to accommodate the economic decline.  If anything, it either remains unchanged or rise gradually increasing the burden on the budget.

It’s human nature to assume false sense of security during economic boom that leads to an ill-prepared situation for inevitable budget crisis. Combined with the common error is the ideology of the legislators who hold the crisis hostage to justify their political means. Regrettably, actions of this nature by ‘Kamikaze’ pilots produce devastating results.

Many compelling reasons provided to vote for the propositions served on the ballots scheduled early next week. Obviously, the importance laid on the opportunity to derive $6 billion borrowing from the future lottery earnings to survive the immediate crisis.

The circumstance is somewhat similar to SOS from the protective-gearless team at the cliff edge requesting the rescue squad (the voters in this case) to assist them in descending the slippery slope with minimal skull and bone injury.

Since the solution to the budget crisis relies on the revenue and spending equation, exploring ways to generate the deficit amount- $21.3 billion urgently needed to resolve the crisis. It appears that a wide area in spending cuts reviewed and essential programs and services streamlined to meet the challenge. Any further measures to divert funds from these sources i.e. Prop 1B, D and E, would exacerbate the crisis in the long run. It’s noteworthy that preventive care is always cost effective than cure.

The best alternative is to examine the revenue path to raise income for the burgeoning problem. No matter how one circumvents the situation, temporarily raising taxes is an irreversible reality and the only guaranteed avenue to salvage the deficit debacle.

1. Sales tax on items purchased via on-line is legitimate and widely applied around the world.

2. Gasoline tax would be appropriate around this time, considering the decrease in oil prices
recently.

3. In the transportation sector – airport tax, port fees, levies, import duty, quota items,
documentation fees and charges are some areas worth revising.

4. Closing state tax-evasion loopholes to derive income is yet another reliable source.

5. Marginal increase in the parking fees at beaches and parks are attention-worthy.

6. Sale/Leasing government buildings to federal agencies and corporations seeking sports
venues would be suitable for income source.

7. Issuing drivers license and allowing all undocumented workers to register their vehicles
would not only generate income for the state, it would also strengthen state and national
security with the documentation of all residents in the state.

Subsequently, acquiring vehicle insurance by the undocumented workers would minimize the burden on registered owners in addition to stimulating the economy through insurance industry.

8. Entertainment tax receipts from the philanthropic entertainment industry would sufficiently
provide for the deficit cut.

9. In the environmental front – cap and trade emission upon legislation should create opportunity for
state income.

10.The state should not discount borrowing from the federal government given the ‘bailout’ season
prevailing in Washington right now.

11. Among the spending cuts – Abolition of death penalty in California and elsewhere would be a groundbreaking rule aside from being earth shattering for the opponents. Besides reflecting the contemporary modern society, it is morally, ethically and financially right on target.

According to legal professionals directly involved in the state criminal justice system, millions of dollars squandered on the perennial appeals and criminal proceedings leaving the inmates on death row for an indefinite period.  Instead, life sentence without parole and having them involved in the activities that would pay for their upkeep in the prison is the ideal strategy. Prison systems and jails in the state would benefit from a major transformation in serving as the reform and revenue center rather than a medieval archive and a liability on the taxpayers.

The legislators’ iron will to defend their failed policies and ideologies has contributed to the special election event in California on May 19, 2009.  Voters across the state of California must realize that abstinence from voting any time in a democracy is renunciation of personal and constitutional right.  The moral equivalence of discarding the exclusive right would be to entrust life in the hands of the lawmakers primarily responsible for the embarrassing fiscal mismanagement.

Desperate times calls for desperate measures and the electorate have an awesome responsibility towards themselves, families and fellow citizens to exercise diligence and cast ballots in saving the golden state from potential bankruptcy.

Special election is a reminder that two-third majority law in budget and other legislation in both state and federal level best replaced by a simple majority rule for democracy to function efficiently.

Californians can only save California on the brink of collapse on Tuesday, May 19, 2009 with an overwhelming majority approval of the Propositions as recommended above.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under United States | Leave a Comment 

Balancing California Budget

February 12, 2009

The golden state is in deep economic crisis, sharing the status quo of the nation.

As per Wikipedia.org – California would have the 7th highest GDP in the world if thought of as a country (not including the US as a whole, if so, it would be 8th).

A great state like California being the epicenter for – besides earthquakes,

Technology

Biotech and stem cell research

Entertainment symbolized by Hollywood

Diverse talent and skill pool making outstanding contributions in various fields.

Yet, the fundamental responsibility of the state government to balance the budget postponed indefinitely due to partisan politics with Republican minority misusing the two-third majority approval against the incumbent Democrats in the legislature.

As a result, the taxpayers of the economy are abandoned and the entire population is at the mercy of the minority rule upholding the conventional ideology against contemporary wisdom.

It is Déjà Vu for those following the federal government struggle to get the economic stimulus bill approved by both Houses of Congress.

The dilemma of balancing the budget with the political parties’ resistance to compromise is a daunting task for any administration. It is beyond comprehension that failed policies and inconvenient principles continue to dominate the center stage at both state and federal level in legislative matters.

California budget deficit currently at $42 billion with unemployment skyrocketing to 9.3% and expected to worsen by the year-end;

Clearly, the economic recession is widespread and taken severe toll on the present and future taxpayers of the economy.
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Challenges:

How does the state reduce the budget deficit of $42 billion?

Generally, the options would be exploring ways to generate revenues and cutting costs proven liabilities with no income or other benefits to the taxpayers of the economy.

Revenues:

How does the state generate revenues?

Usually, the government revenue sources are taxes paid by individuals and Corporations.

They are in the form of income tax, estate tax, corporate tax, payroll tax, sales tax, customs and excise duty on export and import items as well as fees and charges for any government provided services. If the state has other assets in the form of government bonds and treasury bills, they comprise negotiable instruments to borrow money.

In addition, the government could potentially expect income from investments in industries via quasi contracts, state run institutions, sale and/or leasing of government land to private sectors and trade goods and services with neighboring states or foreign governments. Some states find ways and means to share natural resources with their neighbors within and outside the nation for income.

Then, a federal aid to boost social services, health and educational programs is other channel for financial assistance.

Obviously tax increases is the common strategy for meeting budget shortfall. If income and aid are available from stated sources, then funding expenses is affordable.
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Spending or Costs Elimination:

In this category, the lawmakers vehemently opposed to tax increases propose massive cutbacks and reduction in spending by a sweeping shutdown of essential services and programs with dire consequences in the long term.

Ironically, investment in education, health, housing, energy and environment are easy targets as “wasteful spending” for legislators in opposition to tax hikes during budget crisis. Those policy makers fail to understand the importance of protecting and nurturing the beneficiaries of these programs as they contribute to the economy today and tomorrow as taxpayers.

Lately, legislators have taken a swipe at education or investment in public school systems at both state and federal levels. It is tragic that such measures are even contemplated leave alone legislated in the industrialized and advanced nation that should be leading the world in K-12 educational program.

The public school system in the State of California and across the nation is in shambles. The infrastructure and the general classroom environment are in desperate need of face-lift to improve academic performance by students of all socio economic backgrounds.

Every dollar spent in a child is an investment in future.

Complete overhauling is required in areas like classroom size, materials including new Textbooks, enriched curriculum with emphasis in Math and Science, Music and Arts, Sports facilities, recruitment of qualified teaching staff, Teachers’ salary, training and professional development, new energy efficient buildings regardless of districts and zones in every state.

Undoubtedly, education must be a priority with K-12 system being the foundation for young minds entering the academic world. The reason United States is lagging behind in international standards is due to neglect of our school system particularly the early learning stage (K-12) when the opportunity to help every student thrive is available to educators.

Therefore, the state and the federal government are obligated to enhance achievements in educational programs through investments in the state-of-the-art educational system.

Similarly, health, housing, energy and environment are equally important as the taxpayers benefit from adequate health care, proper housing, affordable energy, clean and safe environment.
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Pragmatic Solutions:

The best option to reconcile California budget is to consider both tax increases and costs reduction as suggested by many analysts and experts on this issue.

According to the analysis by San Jose Mercury News, February 8, 2009

Budget spending outpaced inflation and state’s growth.

Interestingly, the social services and K-12 education received proportionately less funding as compared to the extra spending identified in Criminal Justice, health care and filling the gap for the reduced vehicle license fee in the analysis of actual spending in 2007-2008.

First, action is required to identify the revenue sources via tax increases.

1. Marginal increase in Sales Tax of goods and services including the sales on the cyberspace would provide an even tax distribution for the society.

2. Increasing Vehicle License fee for all is necessary to address the massive deficit. In this context, it is important to raise another explosive issue of undocumented workers in California without drivers’ license or vehicle registrations.

Issuing drivers license and allowing all undocumented workers to register their vehicles would not only generate income for the state, it would also strengthen state and national security with the documentation of all residents in the state.

Subsequently, acquiring vehicle insurance by the undocumented workers would minimize the burden on registered owners in addition to stimulating the economy through insurance industry.

At present any vehicle registration or insurance by undocumented workers carried out in a back alley manner depriving the state due proceeds.

3. Target items for tax increase to reduce health care costs such as tobacco, hard liquor products and items subject to possible health abuse.

4. In the establishment of social standards, tax increases on winnings through gambling and advertisement sales of pornography (assumed to be a multibillion dollar industry) is justified to make way for important social services and programs.

5. Review and revise taxation policy for California Corporations hoarding income in tax havens along with their offshore subsidiaries.

6. Airport tax, Port fees, dutiable goods, customs and excise duty are other sources of revenue.

7. Increase tax on entertainment industry to pay for education, kids welfare, community hospitals, colleges and institutions.

8. Specific environmental protection act by levying heavy penalties on environmental pollution (air, land and sea) through negligence such as oil spilling, carbon emissions and violation of aviation standards.

9. Marginal increase in gasoline tax would enable energy efficient programs such as solar, wind and hydro thermal power.

10. Last but not the least, leasing government land to corporations and scientific institutions, university laboratories or airline industry with enforcement of strict environmental regulations, not excluding sale of government assets no longer useful in the short or long run.
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Costs Reduction:

Criminal Justice System:

A thorough examination of the Criminal Justice system is necessary from the analysis and news reports.

The State must devise a mechanism to reduce prison population through major social reforms at all levels beginning with the juvenile detention center.

Further, the parole system, three strikes law and other misdemeanor charges reassessed and offenders deployed in monitored community services rather than crowding prisons is the ideal strategy to cutback spending.

Health Care:

Healthy Approach to reducing health care costs –

Medicaid for senior citizens and economically disadvantaged population.

Promoting preventive care with immunizations.

Early diagnosis of diseases through annual or bi-annual medical checkups and

Subsidized prescription drugs through tax incentives to pharmaceutical and bio-tech industry are few possibilities to deal with health care crisis.

Counseling services and Therapy for psychological and other mental health problems as a preliminary screening process to ease the substantial costs in this regard.

General well being encouraged through active life combined with healthy diet in schools and other areas of the community.

Vehicle License Fee backfill – To be reinstated as outlined above.

General Government – Electronic record keeping and updating technology would considerably improve efficiency and prohibit excessive spending in administrative services.

Higher Education – Engagement in community development activities in return for student loans is a progressive cost recovery scheme.

Transportation – Cost savings methods and effective transportation means aimed at conservation of time and energy recommended for this expense.

Resources and environment – Best to follow guidelines suggested above for environment.

All other costs and spending not discussed or highlighted must be carefully reviewed and those proven redundant with no benefit to taxpayers or the State eliminated to reconcile the budget.
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Time for Action by California Legislators

Investment in better education and all of the essential services means building future with healthy, responsible and productive citizens as opposed to increasing prison population demanding major diversion of funding to criminal justice system.

There is an urgency to underscore the fact that not all taxpayers necessarily benefit and appreciate the frugal tax savings by preventing tax increases because such action favors the wealthy minority while leaving the majority marginalized in a society.

If the legislators really care for their constituents and the state/nation they pledge to serve, they need to pause and reflect on the realities of depriving majority of the population to decent lifestyle and economic prosperity, the predominant cause of the current sluggish consumer spending.

Often, provision of unemployment and social security benefits, Medicaid, health insurance, food stamps…dismissed as socialized enigma in a Capitalist economy. Unfortunately, a reminder is required that subscribers of these benefits and services ultimately contribute to the success of the capitalist system as consumers of various products and services.

As stated earlier in the blogpost titled Redistribution of Wealth, Oct 31, 2008, www.padminiarhant.com

Promoting economic status as highlighted above…

Eventually, create a fair system of sharing the economic burden by all rather than only by the affluent ones.

Such farsighted and permanent solutions are in direct contradiction to the myth and misnomer of the doctrine against short term tax increases essential to combat severe economic recession.

Socialism, Marxism may well be the nemesis to Capitalism,

Capitalism cannot thrive without consumerism – – That is the fact

California budget crisis must be resolved with no further delay.

It is time for legislators to set the priorities right to fit in with the new millennium goals.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy, Featured | Leave a Comment