Thursday, June 07, 2018

Status of the Social Security Trust Funds


Comments for the Record
United States House of Representatives
Committee on Ways and Means
Social Security Subcommittee
Hearing on Examining Social Security’s Solvency Challenge:
Status of the Social Security Trust Funds
Thursday, June 7, 2018, 11:00 AM


By Michael G. Bindner
Center for Fiscal Equity

Chairman Johnson and Ranking Member Larson, thank you for the opportunity to submit my comments on this topic. These comments are an update to those provided last July and the previous September, although truthfully not much has changed, except that the tired old meme that we are stealing from the Trust fund by loaning it to the General Fund is going around again. This is usually an indication that Wall Street wants to make a run at using it as a source of fee income again, thinking that this President will let them. I urge you to resist the urge to go along with such idiocy. Someone has to be the grownup in the debate. Of course, if any such plan is proffered before the election, the Democrats will certainly eat the GOP alive.

We will leave it to the invited witnesses to explain the difference between the future projections, except to say that both forecasts are required to be conservative.  As the Economic Policy Institute found many years ago when attempts were being made to justify personal accounts in Social Security, there is truly no solvency problem if more realistic estimates are used.  Of course, that relates to the system as a whole, not on how the Trust Fund is to be reimbursed, as we reiterate below. 

Lessons from the Great Recession

The 2008 Recession triggered by our continuing asset-based Depression has both temporary and permanent effects on the trust fund’s cash flow. The temporary effect was a decline in revenue caused by a slower economy and the temporary cut in payroll tax rates to provide stimulus that has since been repealed, although the amount was added to the Trust Fund for later withdrawal, regardless of contributions not made.

The permanent effect is the early retirement of many who had planned to work longer, but because of the recent recession and slow recovery, this cohort has decided to leave the labor force for good when their extended unemployment ran out. This cohort is the older 77ers and 99ers who needed some kind of income to survive. The combination of age discrimination and the ability to retire has led them to the decision to retire before they had planned to do so, which impacts the cash flow of the trust fund, but not the overall payout (as lower benefit levels offset the impact of the decision to retire early on their total retirement cost to the system).  In addition, it has been made easier for workers over 50 to retire on disability (as I have done), with many of us approved on the first try.

The Reagan-Pepper Compromise

When Social Security was saved in the early 1980s, payroll taxes were increased to build up a Trust Fund for the retirement of the Baby Boom generation. The building of this allowed the government to use these revenues to finance current operations, allowing the President and his allies in Congress to honor their commitment to preserving the last increment of his signature tax cut.

This trust fund is now coming due, so it is entirely appropriate to rely on increased income tax revenue to redeem them. It would be entirely inappropriate to renege on these promises by further extending the retirement age, cutting promised Medicare benefits or by enacting an across the board increase to the OASI payroll tax as a way to subsidize current spending or tax cuts.

The cash flow problem currently experienced by the trust fund is not the trust fund’s problem, but a problem for the Treasury to address, either through further borrowing – which will require continued comity on renewing the debt limit – or the preferable solution, which higher taxes for those who received the lion’s share of the benefit’s from the tax cuts of 1981, 1986, 2001, 2003 and 2010.  Many also complain that this recovery is anemic.  That is likely because too many upper-middle income taxpayers were given a permanent tax cut from 2001.  Less savings and more taxation would boost spending on both transfer payments and government purchases – especially transfers to the retired and disabled.

What most threatens the Trust fund is to do a tax cut under the guise of tax reform, especially at the upper income levels.  Upper income families were given preference in the 1980s when OASI taxes went up while the Reagan tax cuts were preserved.  That should not happen again.

The ultimate cause of the trust fund’s long term difficulties is not financial but demographic. Thus, the solution must also be demographic – both in terms of population size and income distribution. The largest demographic problem facing Social Security and the health care entitlements, Medicare and Medicaid, is the aging of the population. In the long term, the only solution for that aging is to provide a decent income for every family through more generous tax benefits.

The free market will not provide this support without such assistance, preferring instead to hire employees as cheaply as possible. Only an explicit subsidy for family size overcomes this market failure, leading to a reverse of the aging crisis.

We propose a $1000 per month refundable child tax credit payable with wages as part of our proposal for a Net Business Receipts Tax.  This will take away the disincentive to have kids a slow economy provides. Within twenty years, a larger number of children born translates into more workers, who in another decade will attain levels of productivity large enough to reverse the demographic time bomb faced by Social Security in the long term.

Such an approach is superior to proposals to enact personal savings accounts as an addition to Social Security, as such accounts implicitly rely on profits from overseas labor to fund the dividends required to fill the hole caused by the aging crisis. This approach cannot succeed, however, as newly industrialized workers always develop into consumers who demand more income, leaving less for dividends to finance American retirements. The answer must come from solving the demographic problem at home, rather than relying on development abroad.

This proposal will also reduce the need for poor families to resort to abortion services in the event of an unplanned pregnancy. Indeed, if state governments were to follow suit in increasing child tax benefits as part of coordinated tax reform, most family planning activities would be to increase, rather than prevent, pregnancy. It is my hope that this fact is not lost on the Pro-Life Community, who should score support for this plan as an essential vote in maintaining a perfect pro-life voter rating.

This is not to say that there is no room for reform in the Social Security program. As I wrote in the January 2003 issue of Labor and Corporate Governance, Congress should equalize the employer contribution based on average income rather than personal income. It should also increase or eliminate the cap on contributions. The higher the income cap is raised, the more likely it is that personal retirement accounts are necessary.

A major strength of Social Security is its income redistribution function. I suspect that much of the support for personal accounts is to subvert that function – so any proposal for such accounts must move redistribution to account accumulation by equalizing the employer contribution.

I propose directing personal account investments to employer voting stock, rather than an index funds or any fund managed by outside brokers. There are no Index Fund billionaires (except those who operate them). People become rich by owning and controlling their own companies. Additionally, keeping funds in-house is the cheapest option administratively. I suspect it is even cheaper than the Social Security system – which operates at a much lower administrative cost than any defined contribution plan in existence.

If employer voting stock is used, the Net Business Receipts Tax/Subtraction VAT would fund it. If there are no personal accounts, then the employer contribution would be VAT funded.

Safety is, of course, a concern with personal accounts. Rather than diversifying through investment, however, I propose diversifying through insurance. A portion of the employer stock purchased would be traded to an insurance fund holding shares from all such employers. Additionally, any personal retirement accounts shifted from employee payroll taxes or from payroll taxes from non-corporate employers would go to this fund.

The insurance fund will save as a safeguard against bad management. If a third of shares were held by the insurance fund than dissident employees holding 25.1% of the employee-held shares (16.7% of the total) could combine with the insurance fund held shares to fire management if the insurance fund agreed there was cause to do so. Such a fund would make sure no one loses money should their employer fail and would serve as a sword of Damocles’ to keep management in line. This is in contrast to the Cato/ PCSSS approach, which would continue the trend of management accountable to no one. The other part of my proposal that does so is representative voting by occupation on corporate boards, with either professional or union personnel providing such representation.

The suggestions made here are much less complicated than the current mix of proposals to change bend points and make OASI more of a needs based program. If the personal account provisions are adopted, there is no need to address the question of the retirement age. Workers will retire when their dividend income is adequate to meet their retirement income needs, with or even without a separate Social Security program.

No other proposal for personal retirement accounts is appropriate. Personal accounts should not be used to develop a new income stream for investment advisors and stock traders. It should certainly not result in more “trust fund socialism” with management that is accountable to no cause but short term gain. Such management often ignores the long-term interests of American workers and leaves CEOs both over-paid and unaccountable to anyone but themselves.

Progressives should not run away from proposals to enact personal accounts. If the proposals above are used as conditions for enactment, I suspect that they won’t have to. The investment sector will run away from them instead and will mobilize their constituency against them. Let us hope that by then workers become invested in the possibilities of reform.

All of the changes proposed here work more effectively if started sooner. The sooner that the income cap on contributions is increased or eliminated, the higher the stock accumulation for individuals at the higher end of the age cohort to be covered by these changes – although conceivably a firm could be allowed to opt out of FICA taxes altogether provided they made all former workers and retirees whole with the equity they would have otherwise received if they had started their careers under a reformed system. I suspect, though, that most will continue to pay contributions, with a slower phase in – especially if a slower phase in leaves current management in place.

One new wrinkle is that I would also put a floor in the employer contribution to OASI, ending the need for an EITC – the loss would be more than up by gains from an equalized employer contribution – as well as lowering the ceiling on benefits. Since there will be no cap on the employer contribution, we can put in a lower cap for the employee contribution so that benefit calculations can be lower for wealthier beneficiaries, again reducing the need for bend points.

Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.

Wednesday, June 06, 2018

Lowering Costs and Expanding Access to Health Care through Consumer-Directed Health Plans


Comments for the Record
United States House of Representatives
Committee on Ways and Means
Lowering Costs and Expanding Access to
Health Care through Consumer-Directed Health Plans
Wednesday, June 6, 2018, 11:00 AM
By Michael G. Bindner
Center for Fiscal Equity

Chairman Roskam and Ranking Member Levin, thank you for the opportunity to submit these comments for the record to the House Ways and Means Health Subcommittee.  They mirror our submission to the committee of
 May 17, 2016.
Proposals along the lines proposed have long been a part of our standard package of health care reforms.  We have long advocated a conversion to catastrophic insurance with a medical savings account to pay for appointments and drugs, although we have always suggested a third element – a Medical Line of Credit to bridge the gap between the current MSA balance at the catastrophic deductible.  The MLC would also pay for services, including acupuncture and reproductive health that may not be covered or coverable under catastrophic insurance.  
Under our standard tax reform proposal, catastrophic policies would be purchased by all employers (and certain self-employed) as an offset to the Net Business Receipts Tax/Subtraction VAT.  The Net Business Receipts Tax (NBRT) includes tax expenditures for family support,  health care and the private delivery of governmental services. It will fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age 60.
While this raises the tax rate, the lack of any tax subsidy would doom private insurance and deny most families medical care.  Likewise, the Health Savings Account would be provided by employers, but would be a deduction rather than a credit.  Medical Lines of Credit would be funded entirely by employees with no tax advantage – as under our plan most employees would not pay any income taxes.
Personal experience with cardiac care (luckily a succession of false alarms) showed that, while this approach makes economic sense, it does not jibe with how doctors operate.  There is no price schedule in the waiting or exam rooms to compare costs for proposed procedures or tests. Health care is not a normal good.  While it responds to market pressures, some care cannot be limited by them. 
I also came to the conclusion with the passage of health care reform – and the electoral rejection of the health care reform above which was not far from what Senator McCain proposed in his 2008 run (and which was not even mentioned as the Republican alternative in the Obamacare debate) – that Americans like their comprehensive insurance.  Most importantly, while the Medical Line of Credit is essential for complete health care, its inclusion essentially short circuits any decision to shop for care.
If the McCain approach cannot pass, will the Affordable Care Act survive the test of time (it has certainly survived all attempts to repeal it)?  Possibly.  The key concept, that people in marginal jobs deserve the same tax subsidies that corporate employees get is sound.  Those parts that fulfill that need, which originated in the Heritage Foundation (which even now clamors for repeal) are also worthy. 
What is less defensible are the higher non-wage income taxes used to fund it, although no bill which just repeals these will survive a Budget Act point of order in the Senate (regardless of House Rules) nor would the political optics look good.  Repeal would hurt too many Americans, so expansion of the tax (along with a rate cut) with some form of consumption or payroll tax– such as the one proposed by Senator Sanders in his single payer plan (or by Mrs. Clinton during her husband’s health care reform effort).  In our proposal, the consumption tax used would be the NBRT/Subtraction VAT.
The main danger to the Affordable Care Act is ease of entry and exit.  If it is too easy to get in, then people will wait until they are sick to sign up.  After they are well, any plan will stop coverage if you stop sending in your monthly premium check.  If enough people do that, rates go up and the cycle goes down.  This eventually leads to a collapse in the system that can be fixed in one of two ways – give everyone cheap and mandatory health care or place health insurers into bankruptcy, like General Motors and Chrysler, and reorganize them into a single-payer system (without any congressional action).  Had the leadership laid out this scenario, it might have stopped the Affordable Care Act – and insurance companies would have most assuredly stopped contributions to the GOP.
The low-cost system with catastrophic care would operate as above (and would hopefully include the Medical Lines of Credit).  Single-payer care would be funded by the NBRT/Subtraction VAT.  Such a tax is superior to the payroll tax proposed by Senator Sanders because it would hit profit.  The upper-income payroll taxes for non-wage income would repealed and incorporated into the NBRT.  
Under Single-Payer, we propose an additional option.  Firms that provide direct health care, such as automobile manufacturers, would not pay for third party coverage at all.  The cost of the coverage provided would be an offset to the NBRT.
We believe that our current insurance system adds no value to health care. Theoretically, insurance pools everyone’s costs and divides them up with everyone paying a monthly share, regardless of the risk they pose.
The profit motive has given us differential premiums based on risk and age. Indeed, the age based premiums in the last attempted health reform were so unaffordable to older Americans in individual plans that the bill could not pass the Senate. Single payer plans, funded through the NBRT, would not have this feature and insurance companies doing claim processing for the government would be paid an adequate profit with little risk.
Short of that, an NBRT subsidized Public Option would allow sicker, poorer and older people to enroll for lower rates, allowing some measure of exclusion to private insurers and therefore lower costs. Of course, the profit motive will ultimately make the exclusion pool grow until private insurance would no longer be justified, leading-again to Single Payer if the race to cut customers leads to no one left in private insurance who is actually sick.
The NBRT can provide an incentive for cost savings if we allow employers to offer services privately to both employees and retirees in exchange for a substantial tax benefit, either by providing insurance or hiring health care workers directly and building their own facilities. Employers who fund catastrophic care or operate nursing care facilities would get an even higher benefit, with the proviso that any care so provided be superior to the care available through Medicaid. Making employers responsible for most costs and for all cost savings allows them to use some market power to get lower rates, but no so much that the free market is destroyed.
This proposal is probably the most promising way to arrest health care costs from their current upward spiral – as employers who would be financially responsible for this care through taxes would have a real incentive to limit spending in a way that individual taxpayers simply do not have the means or incentive to exercise.
While not all employers would participate, those who do would dramatically alter the market. In addition, a kind of beneficiary exchange could be established so that participating employers might trade credits for the funding of former employees who retired elsewhere, so that no one must pay unduly for the medical costs of workers who spent the majority of their careers in the service of other employers.
Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.

Thursday, May 24, 2018

The Budget Resolution--Content, Timeliness, and Enforcement


Comments for the Record
Joint Select Committee on
Budget and Appropriations Process Reform
The Budget Resolution--Content, Timeliness, and Enforcement
Thursday, May 24, 2018, 10:00 AM
By Michael G. Bindner
Center for Fiscal Equity

Co-Chairs Womack and Lowey, thank you for the opportunity to submit these comments for the record on budget and appropriations process reform.  These comments reflect what I published in my book, Musings from the Christian Left in 2004 and which I transmitted to the House Budget Committee in September of 2011 and June of 2016 and to the Senate Committee in October 2011 and to this Committee two weeks ago.

Let me suggest again, as well as myself, some possible additional witnesses from the Academy who suggest very workable reforms that will help. Thomas Lynch of Florida Atlantic University also advocates a two-step budget process in "Federal Budget Reform," beginning with passage of a Joint Budget Resolution, which sets overall spending priorities. After this resolution passes agencies submit their requests, which are considered in detailed budget and bills. The strength of this approach is that it forces Congress to decide on overall priorities before they can begin to consider their local interests. Rudolph Penner and Alan Abramson, in their landmark book Broken Purse Strings, support the establishment of a Joint Budget Committee (echoing Senator Pete Domenici), a Joint Budget Resolution and multi-year budgeting.

The Budget Resolution should be joint rather than concurrent and have both spending targets and suggestions for changes to entitlements and taxes. As per our last comments, it could be passed with regional totals as well, with regional targets for total value added tax revenue and net business receipts tax revenue, entitlement spending, both direct and through tax expenditures and military and civil spending in each region. Even without regional totals, VAT revenue could be tied to military and civil spending with automatic rate modifications and spending cuts if deficits are likely in this area. Entitlement spending deficits are the feedback loop that corrects the economy in downturns, so there should be no automatic cuts in that area.

Phase One: The Joint Budget Resolution

The first phase of the budgetary process is high-level budget enactment. The budget message, revenue estimates and increases, departmental, independent agency and functional spending totals, and deficit projections are included in the Joint Budget Resolution proposal. Until the resolution is enacted the Executive withholds detailed spending estimate or authorizing language. The proposal is submitted to Congress during mid-January, with passage of the Joint Budget Resolution by the July 4th recess.

A Joint Committee on the Budget considers the resolution. The Committee consists of members of the leadership of both houses, various committee chairs and members, and members not assigned to any major authorizing or appropriations committee (who shall be a majority). The Chair alternates between chambers. Such a committee is necessary to expedite action.

After the Committee reports the resolution it is considered in an expedited fashion. If there are differences between the amended versions of the resolution it goes back to the Committee one final time, and acts as a conference committee in this case.

The Executive Branch uses the totals enacted in the Joint Budget Resolution as the totals in its detailed authorizations and appropriations submissions.


During Budget Control Act years, unless a Joint Budget Resolution is passed, the budget caps in the Budget Control Act will be considered allocations for the purpose of drafting appropriations legislation and automatic appropriations should appropriations bill not be enacted by the start of the fiscal year. We suggest that as part of any reform, new caps be set out for the next decade at levels in line with the recently enacted Omnibus Appropriations Legislation. As long as the current tax cuts are in force, the money not collected in taxes should be made up with bond sales, else all sorts of mischief occur in the area of asset accumulation and inflation. Such accumulations are not economic growth, they are the manufacture of speculative investment bubbles that always lead back to recessions and depressions. There is no such thing as a business cycle, only rich people who are undertaxed who invest in garbage.

Phase Two: Authorization

The second phase of the budgetary process is authorization, which begins after the Joint Budget Resolution is signed, in July of the first session. Most of the authorization process is accomplished before the appropriations process begins. To guarantee this, no appropriations bill is marked up in committee in either house until the authorization bill has secured floor passage in that house, including tax and entitlement adjustments. This occurs by February of the second session. At the start of a new President's term honeymoon authorizations changes are submitted by February, with enactment by September so that they take effect October first.

As part of this process, authorizing committees consider major regulations enacted since the last authorization. Doing so avoids the practice of appropriators playing games with the funding of regulatory agencies, since Congress has the opportunity to work its will during the authorization process. Before continuing on to the appropriations phase, I briefly discuss ways in which regulatory power is exercised in such a way as to not appear illegitimate by the vast majority of the public.

Phase Three: Appropriations

The third phase of the budgetary process is appropriations. The Executive Branch begins preparing its detailed appropriation submissions after passage of the Joint Budget Resolution in July of the previous year. It modifies its targets when Authorization legislation is marked up. The Appropriations submissions clear OMB and go to the Hill by March 15th of the second session. The submissions for each program are between the ceiling and floor listed in the authorization legislation. The total for the agency or department matches the total found in the Joint Budget Resolution. Agency submissions reflect program financial performance. Agency personnel defend the submission.

Appropriations sub-committees do not markup legislation until after the authorization has cleared the full chamber. The full Appropriations Committees reports by June 15. If the total for an appropriations bill exceeds the total specified in the Joint Resolution the bill must clear the Joint Budget Committee before going to the floor. Legislation gets to the President's desk by Labor Day.

If an appropriations bill is not enacted prior to the start of the fiscal period (October 1) the current distribution of spending within current law is maintained, minus programs cancelled in the authorization phase, at the total set in the Joint Budget Resolution. This prevents the government from stopping at the end of the fiscal year. Likewise, if there is no JBR or authorization legislation passed, the Budget Control Act totals, with the same current distribution as current law, are enacted.

This last measure is not meant to be used and it should not be if the Congress operates bipartisanly under effective leadership. If that leadership breaks down, however, the government absolutely must have a backup procedure.

Enactment of this proposal restores discipline to the budget process. Every actor in the process has specific responsibilities and incentives to meet them. Each actor maintains his share in the process, but not more than his share. The Executive Branch is forced to offer realistic proposals. The Legislative Branch meets its deadlines. The Federal Government then stops arguing about the budget and gets on with the business of governing.

Fiscal Reform

The remainder of our comments address the budget itself. As usual, our comments are based on our four-part tax reform plan, which is as follows:

  • ·         A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.
  • ·         Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments.  Heirs would also pay taxes on distributions from estates, but not the assets themselves, with distributions from sales to a qualified ESOP continuing to be exempt.
  • ·         Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.
  • ·         A VAT-like Net Business Receipts Tax (NBRT), essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age sixty.


When these proposals were first submitted to the Fiscal Commission in 2010, the value added tax in bullet one was regionally set, which would have required a constitutional amendment to overturn the requirement of uniform excise tax rates. The actual establishing of a regional caucus would not require constitutional change, so Congress could give it a trial before setting it in stone.

Regionalizing the domestic and military functions of the executive branch under regional vice presidents could be done by statute or even executive order, although an amendment would be required to confine election of the RVP to only the electors of that region. In this regime, either the remaining national caucus or each regional caucus would enact its Joint Budget Resolution, taking into account regional spending and economic conditions, which would be signed or allowed to pass by the President at the recommendation of the RVP. The regional caucus would enact the VAT rate and spending bills, with a balance requirement, automatic enactment of appropriations by the start of the fiscal year and sequesters and VAT rate adjustments if the budget is out of balance. It is automatic enactment that will spur both Congress and Regional Caucuses to act. Timeline discipline only occurs when there are no consequences. Put the consequences in and suddenly deals are made.

Deficit financing through debt limit extensions will be enacted automatically, as part of the Joint Budget Resolution. Of course, if income tax rates on the wealthy are high enough, the problem will be how manage paying down the debt so that it does not upset the reserve requirements of the Federal Reserve system and the currencies of many countries. It is a luxury problem we can handle. The challenge will be how to ignore calls for tax cutting as the debt is being paid down. Keeping the linkage between a high-income-surtax and debt financing should do the trick.

The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. The Gross Debt (we have to pay back trust funds too) is $19 Trillion. Income Tax revenue is roughly $1.8 Trillion per year. That means that for every dollar you pay in taxes, you owe $10.55 in debt (although this will increase). People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands.

The answer is not making the poor pay more or giving them less benefits, either only slows the economy. Rich people must pay more and do it faster. My child is becoming a social worker, although she was going to be an artist. Don’t look to her to pay off the debt. Your children and grandchildren and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive?

When Social Security was saved in the early 1980s, payroll taxes were increased to build up a Trust Fund for the retirement of the Baby Boom generation. The building of this allowed the government to use these revenues to finance current operations, allowing the President and his allies in Congress to honor their commitment to preserving the last increment of his signature tax cut.
This trust fund is now coming due, so it is entirely appropriate to rely on increased income tax revenue to redeem them. It would be entirely inappropriate to renege on these promises by further extending the retirement age, cutting promised Medicare benefits or by enacting an across the board increase to the OASI payroll tax as a way to subsidize current spending or tax cuts.
Those who object to entitlement spending likely object most to its redistributive function and would strengthen those reforms that allow wealthier savers to retire with more while the poor have less. We absolutely object to that. It is not what we would call an American action.
The problem with entitlements is not overspending, but too drastic a set of tax cuts on the wealthy. If Social Security or Medicare is suffering, and it is not, then changing how revenue is collected fixes the problem easily. Simply lower the employee contribution to FICA so that rich people get less, decouple the employer and employee contributions with the employer contribution funded to each worker EQUALLY (without regard to income) and through a subtraction VAT or Net Business Receipts Tax with no cap, as per our standard recommendation.
Our tax reform plan alters how we deal with entitlement spending, including Social Security, by shifting payroll and a good bit of income taxation (including pass-throughs) to a subtraction value added tax/net business receipts tax (NBRT), where certain entitlements can be shifted to employers in lieu of paying a portion of the tax, with this encouraging both employment and participation in training programs in order to have access to social services.
These deduction and credits could include everything from the last two years of undergraduate and graduate education to a more robust child tax credit to health care reform that encourages hiring medical staff directly (thus matching the incentive to cut cost to the ability to do so) to retirement savings in lieu of Social Security, although the savings should be in the form of employer voting stock rather than unaccountable index funds run from Wall Street. These reforms can be hammered out next year or in the next Congress, but the right tax to hold them is clearly the NBRT.
This plan gives regions an incentive to cut discretionary spending and transfer entitlement functions to employers, as well as to encourage the wealthy to finally pay their fair share of taxes to virtually eliminate the debt. It gives Congress, nationally and maybe regionally, an incentive to get its work done (until it has no work). After a time, there may be little need for a budget resolution at all, at least on the national level. Frankly, there is a good argument to be made for eliminating it altogether and let the Chairs of the Appropriations Committees set the marks for the subcommittees. This would end the paralysis by analysis we face each year, and that would be a good thing.
Thank you for the opportunity to address the Joint Select Committee.  We are, of course, available for direct testimony or to answer questions by members and staff.

Wednesday, May 23, 2018

Tax Reform and Small Business

Comments for the Record
United States House of Representatives
Committee on Ways and Means
Tax Policy Subcommittee
Tax Reform and Small Business:
Growing Our Economy and Creating Jobs
Wednesday, May 23, 2018, 10:00 A.M.
By Michael G. Bindner
Center for Fiscal Equity

Chairmen Brady and Buchannan Ranking Members Neal and Doggett, thank you for the opportunity to comment on the new tax law.

The Brookings-Urban Tax Policy Center looked at the distribution of benefits of the new tax law. It found that they mostly went to the highest income taxpayers. The small businesses most likely to benefit are on Wall Street, not Main Street. This will have little impact on services in the lower Manhattan area, since these cuts are unlikely to affect consumption on meals and entertainment in the area, which is also priced at the high end. It may impact real estate and personal services spending in the Greater New York area, but again, these areas are not particularly suffering.

The plurality of small businesses are not high income. Indeed, they are actually 1099 employees whose income tax rates are far below the special rates for Pass Through businesses. Real tax reform would have given the clients of these individuals an incentive to hire them full-time with benefits. I suspect that the new law did the reverse.

We are on record predicting that enactment of the Fiscal and Job Cuts Act (not a typo) will restrict wages and cause other labor cost savings so that executives can cash in on the lower tax rates by earning higher bonuses. This means more cost cutting and 1099 employment, which is not as good for the employee as full-time statutory employment.

Small businesses will gain more from increased federal spending in the Two-Year Omnibus appropriation. They will spend money from government spending and spur the economy. None of that have come from tax cuts.

The two-year Omnibus will eat up most of the effect of the tax cut on the economy, which will now have a negative relationship between deficits (net of net interest, which controls for matching injection to the financial markets from federal borrowing) and economic growth, meaning deficits are good. The closest available curve showing that model are the Bush years, so given the current deficit size, the predicted growth rate in about a year (it takes time to obligate money and pay bills) should be around 3.3% or higher.

We remind the Committee that in the future we face a crisis, not in entitlements, but in net interest on the debt, both from increased rates and growing principal. This growth will only feasible until either China or the European Union develop tradeable debt instruments backed by income taxation, which is the secret to the ability of the United States to be the world’s bond issuer. While it is good to run a deficit to balance out tax cuts for the wealthy, both are a sugar high for the economy. At some point we need incentives to pay down the debt.

The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. The Gross Debt (we have to pay back trust funds too) is $19 Trillion. Income Tax revenue is roughly $1.8 Trillion per year. That means that for every dollar you pay in taxes, you owe $10.55 in debt (although this will increase). People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands.

The answer is not making the poor pay more or giving them less benefits, either only slows the economy. Rich people must pay more and do it faster. My child is becoming a social worker, although she was going to be an artist. Don’t look to her to pay off the debt. Your children and grandchildren and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive?
Those small businesses from Wall Street, et al who are in high income tax brackets will be the ones paying back the debt in the future. It would have been better to simply not have raised their taxes.
Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.

Wednesday, May 16, 2018

Growing Our Economy and Creating Jobs


Comments for the Record
Committee on Ways and Means
Tax Policy Subcommittee
Tax Reform:
Growing Our Economy and Creating Jobs
Tuesday, May 16, 2018, 10:00 A.M.
By Michael G. Bindner
Center for Fiscal Equity

Chairmen Brady and Buchannan Ranking Members Neal and Doggett, thank you for the opportunity to comment on the new tax law.

This is not the tax reform bill we had hoped for. Frankly, the path negotiated during the Obama Administration enacted under the American Tax Relief Act and The Budget Control Act were adequate to give us our current economy, which is improving, albeit too slowly for workers.  

We are on record predicting that enactment of the Fiscal and Job Cuts Act (not a typo) will restrict wages and cause other labor cost savings so that executives can cash in on the lower tax rates by earning higher bonuses, so that any economic gains (and growth could come faster) would be from deficit spending. While some companies gave very visible bonuses for the holidays, they did not als0 increase salary levels noticeably. Productivity has made huge gains but wages have not, mostly because employers have a market advantage in the down economy, which is good for CEOs and donors, but bad for the nation.

The tax law was a classic piece of Austrian Economics, where booms are encouraged, busts happen with no bail outs and the strong companies and best workers keep jobs and devil take the hindmost. It is economic Darwinism at its most obvious, but there is a safety valve. When tax cuts pass, Congress loses all fiscal discipline, the Budget Control Act is suspended and deficits grow. Taxpayers don’t mind because bond purchasers are sure to pick up the slack, which they will as long as we run trade deficits, unless the President’s economic naivete ruins that for us.

The two-year Omnibus will eat up most of the effect of the tax cut on the economy, which will now have a negative relationship between deficits (net of net interest, which controls for matching injection to the financial markets from federal borrowing) and economic growth, meaning deficits are good. The closest available curve showing that model are the Bush years, so given the current deficit size, the predicted growth rate in about a year (it takes time to obligate money and pay bills) should be around 3.3% or higher.

If you cut entitlements, growth will be reduced, although wealthier Americans will have more money, which will lead to asset inflation and another sizeable recession, akin to 2008. We had been worried about entitlement cuts, we no longer are. The votes are simply not available in the Senate to enact them.

Of course, we still have a tax reform plan and it does alter how we deal with entitlement spending, including Social Security, by shifting payroll and a good bit of income taxation (including pass-throughs) to a subtraction value added tax/net business receipts tax (NBRT), where certain entitlements can be shifted to employers in lieu of paying a portion of the tax, with this encouraging both employment and participation in training programs in order to have access to social services.

These deduction and credits could include everything from the last two years of undergraduate and graduate education to a more robust child tax credit to health care reform that encourages hiring medical staff directly (thus matching the incentive to cut cost to the ability to do so) to retirement savings in lieu of Social Security, although the savings should be in the form of employer voting stock rather than unaccountable index funds run from Wall Street. These reforms can be hammered out next year or in the next Congress, but the right tax to hold them is clearly the NBRT.

We remind the Committee that in the future we face a crisis, not in entitlements, but in net interest on the debt, both from increased rates and growing principal. This growth will only feasible until either China or the European Union develop tradeable debt instruments backed by income taxation, which is the secret to the ability of the United States to be the world’s bond issuer. While it is good to run a deficit to balance out tax cuts for the wealthy, both are a sugar high for the economy. At some point we need incentives to pay down the debt.

The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. The Gross Debt (we have to pay back trust funds too) is $19 Trillion. Income Tax revenue is roughly $1.8 Trillion per year. That means that for every dollar you pay in taxes, you owe $10.55 in debt (although this will increase). People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands.

The answer is not making the poor pay more or giving them less benefits, either only slows the economy. Rich people must pay more and do it faster. My child is becoming a social worker, although she was going to be an artist. Don’t look to her to pay off the debt. Your children and grandchildren and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive?
Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.

Wednesday, May 09, 2018

Bipartisanship in Budgeting


Comments for the Record
Joint Select Committee on
Budget and Appropriations Process Reform
Bipartisanship in Budgeting
Wednesday, May 9, 2018, 10:00 AM
By Michael G. Bindner
Center for Fiscal Equity

Co-Chairs Womack and Lowey, thank you for the opportunity to submit these comments for the record on budget and appropriations process reform.  We hope that for the future you will publish procedures for receiving submissions for the record, preferably by e-mail. These comments reflect what I published in my book, Musings from the Christian Left in 2004 and which I transmitted to the House Budget Committee in September of 2011 and June of 2016 and to the Senate Committee in October 2011. We also discuss our tax reform proposals in light of the budget process.

Let me suggest, as well as myself, some possible witnesses from the Academy who suggest very workable reforms that will help. Thomas Lynch of Florida Atlantic University also advocates a two-step budget process in "Federal Budget Reform," beginning with passage of a Joint Budget Resolution, which sets overall spending priorities. After this resolution passes agencies submit their requests, which are considered in detailed budget and bills. The strength of this approach is that it forces Congress to decide on overall priorities before they can begin to consider their local interests. Rudolph Penner and Alan Abramson, in their landmark book Broken Purse Strings, support the establishment of a Joint Budget Committee (echoing Senator Pete Domenici), a Joint Budget Resolution and multi-year budgeting.

For most of recent memory, especially in years where large deficits loom, the Congress and the President have been unable to reach consensus on a budget in time for the start of the fiscal year on October first. This is almost scandalous, given the impact of the federal government on the economy. The lives of millions of hardworking public servants and contractors hang in the balance while Congress debates, or more likely stalemates. While it is healthy to debate the nature of government from time to time, holding the nation hostage to stage it is not.

When the government is divided between the parties, budgets are submitted "dead on arrival.” This leads to a series of missed deadlines and a likely impasse that threatens to shut the government down at the beginning of the fiscal year. Often, the impasse leads to the need for an Omnibus Appropriation Act, with its attendant pork barrel spending to assure passage (a practice which further undermines citizen confidence in the Federal Government). The same wasteful programs and tax benefits get funded and the budget crisis goes on. This goes on because each side gains political points for blaming the other, while no one has any stake in lessening their own role.


The topic of bipartisanship always comes up when the current majority is facing an electoral rout. There is Balanced Budget Amendment which often includes super-majority requirement to either run a deficit or raise taxes. It essentially guarantees the new minority either a veto or more likely a way to stop the budget process. It is exactly the wrong thing to do.

The right thing to do is to make sure the process moves forward automatically so that shutting down the government is never a possibility.

The federal budget process is broken. It must be replaced with a new budget process that allows for agreement on broad issues and a continuation of government while the details and controversies at the programmatic level are worked out. The solution must include incentives to keep the process moving. To force congressional movement on overall priorities, the administration withholds detailed appropriations proposals until a general solution is passed in both houses of Congress and signed by the President (a Joint Budget Resolution). After this is passed, detailed proposals are submitted and acted upon by the authorization and appropriations committees. A two-year budget process is suggested to assure the process is completed on time.

Phase One: The Joint Budget Resolution
The first phase of the budgetary process is high-level budget enactment. The budget message, revenue estimates and increases, departmental, independent agency and functional spending totals, and deficit projections are included in the Joint Budget Resolution proposal. Until the resolution is enacted the Executive withholds detailed spending estimate or authorizing language. The proposal is submitted to Congress during mid-January, with passage of the Joint Budget Resolution by the July 4th recess.

A Joint Committee on the Budget considers the resolution. The Committee consists of members of the leadership of both houses, various committee chairs and members, and members not assigned to any major authorizing or appropriations committee (who shall be a majority). The Chair alternates between chambers. Such a committee is necessary to expedite action.

After the Committee reports the resolution it is considered in an expedited fashion. If there are differences between the amended versions of the resolution it goes back to the Committee one final time, and acts as a conference committee in this case.

The Executive Branch uses the totals enacted in the Joint Budget Resolution as the totals in its detailed authorizations and appropriations submissions.

During Budget Control Act years, unless a Joint Budget Resolution is passed, the budget caps in the Budget Control Act will be considered allocations for the purpose of drafting appropriations legislation and automatic appropriations should appropriations bill not be enacted by the start of the fiscal year. We suggest that as part of any reform, new caps be set out for the next decade at levels in line with the recently enacted Omnibus Appropriations Legislation. As long as the current tax cuts are in force, the money not collected in taxes should be made up with bond sales, else all sorts of mischief occur in the area of asset accumulation and inflation. Such accumulations are not economic growth, they are the manufacture of speculative investment bubbles that always lead back to recessions and depressions. There is no such thing as a business cycle, only rich people who are undertaxed who invest in garbage.

Phase Two: Authorization
The second phase of the budgetary process is authorization, which begins after the Joint Budget Resolution is signed, in July of the first session. Most of the authorization process is accomplished before the appropriations process begins. To guarantee this, no appropriations bill is marked up in committee in either house until the authorization bill has secured floor passage in that house, including tax and entitlement adjustments. This occurs by February of the second session. At the start of a new President's term honeymoon authorizations changes are submitted by February, with enactment by September so that they take effect October first.

Authorization legislation addresses changes to current law, revised spending ceilings and floors (which the marked up appropriations bills does not exceed or fall short of subject to a point of order), any new programs or program elimination (the only time these occur), changes to agency regulations, adjustments to any entitlement, and estimates of their effect on the next fiscal period.
The revenue committees examine the progressivity of both taxation and spending to assure that the middle class pays for itself and the upper 20% pay for the benefits they receive plus a lions share of the benefits for the bottom 20% of income earners. Corrections in the tax code are enacted as a result of this review. The revenue committees also examine the level for cost of living adjustments (COLAs) and indexing. COLAs and indexing are adjusted so the public sector neither loses or gains as the result of inflation.

As part of this process, authorizing committees consider major regulations enacted since the last authorization. Doing so avoids the practice of appropriators playing games with the funding of regulatory agencies, since Congress has the opportunity to work its will during the authorization process. Before continuing on to the appropriations phase, I briefly discuss ways in which regulatory power is exercised in such a way as to not appear illegitimate by the vast majority of the public.

Increasing Congressional Review of Regulation
A major theme in modern political life is the popular protest against regulations enacted by unelected bureaucrats. This anti-Washington theme aided the campaigns of many recent administrations, including the current one. Other reforms in the regulatory review process increased regulatory accountability to the President. However, these did little to improve the position of Congress.

On June 30, 1983, the Supreme Court ruled the legislative veto unconstitutional in an immigration case, In re: Chada. Since that time a Joint Resolution of Disapproval legislative veto has been enacted as a general case. Several other legislative vetoes have also been acted into law. However, many of these cannot survive the standards imposed by the Chada decision. Therefore, Congressional control of agency regulation remains an open question.

To regain control of regulations, authorization committees review the body of regulations under their purview during consideration of the President’s budget. The President or Independent Agencies submit any changes to their major regulations (enacted since their last authorization) as an appendix to their authorization proposals. If the authorizing committees approve of the changes they do nothing. However, if they are unsatisfied with the changes, or wish to make changes of their own they can at this juncture. These changes are made one of two ways. The first way is to write the change into law, which restricts subsequent action. If circumstances change the agency then seeks legislative relief or waits until the next authorization cycle. This option limits the ability of agencies to deal with emergencies, making it undesirable. The second way is to change agency regulation by law, allowing for further change as circumstance changes. This almost superficial difference preserves flexibility in the regulatory process, making it desirable.

Enactment of this proposal firmly places regulatory initiative with the Congress. This approach gives the people say in the regulatory process through Congress, strengthening representative government. In doing so it helps the less well organized (who know how to reach their Congressman, but not the administrative agency). The regulatory review provisions have two more advantages over the status quo. First, they bring the regulatory review process into sharper view, allowing for more involved citizen input. Second, they avoid the constitutional pitfalls of the legislative veto.


Phase Three: Appropriations
The third phase of the budgetary process is appropriations. The Executive Branch begins preparing its detailed appropriation submissions after passage of the Joint Budget Resolution in July of the previous year. It modifies its targets when Authorization legislation is marked up. The Appropriations submissions clear OMB and go to the Hill by March 15th of the second session. The submissions for each program are between the ceiling and floor listed in the authorization legislation. The total for the agency or department matches the total found in the Joint Budget Resolution. Agency submissions reflect program financial performance. Agency personnel defend the submission.

Appropriations sub-committees do not markup legislation until after the authorization has cleared the full chamber. The full Appropriations Committees reports by June 15. If the total for an appropriations bill exceeds the total specified in the Joint Resolution the bill must clear the Joint Budget Committee before going to the floor. Legislation gets to the President's desk by Labor Day.

If an appropriations bill is not enacted prior to the start of the fiscal period (October 1) the current distribution of spending within current law is maintained, minus programs cancelled in the authorization phase, at the total set in the Joint Budget Resolution. This prevents the government from stopping at the end of the fiscal year. Likewise, if there is no JBR or authorization legislation passed, the Budget Control Act totals, with the same current distribution as current law, are enacted.

This last measure is not meant to be used and it should not be if the Congress operates bipartisanly under effective leadership. If that leadership breaks down, however, the government absolutely must have a backup procedure.

Enactment of this proposal restores discipline to the budget process. Every actor in the process has specific responsibilities and incentives to meet them. Each actor maintains his share in the process, but not more than his share. The Executive Branch is forced to offer realistic proposals. The Legislative Branch meets its deadlines. The Federal Government then stops arguing about the budget and gets on with the business of governing.

Fiscal Reform
The remainder of our comments address the budget itself. If our usual changes suggested reforms are enacted, they will require additional changes. In this we echo the comments by Dr. Douglas Holtz-Eakin during your first hearing on April 17th, which happened without much fanfare. Others have also said that if the content is not fixed, the process cannot be. Of course, we disagree with Dr. Holtz-Eakin’s prescription for cutting entitlements, as we will explain below.  As usual, our comments are based on our four-part tax reform plan, which is as follows:

  • ·         A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.
  • ·         Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments.  Heirs would also pay taxes on distributions from estates, but not the assets themselves, with distributions from sales to a qualified ESOP continuing to be exempt.
  • ·         Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.
  • ·         A VAT-like Net Business Receipts Tax (NBRT), essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age sixty.


When these proposals were first submitted to the Fiscal Commission in 2010, the value added tax in bullet one was regionally set, which would have required a constitutional amendment to overturn the requirement of uniform excise tax rates. The actual establishing of a regional caucus would not require constitutional change, so Congress could give it a trial before setting it in stone.

Regionalizing the domestic and military functions of the executive branch under regional vice presidents could be done by statute or even executive order, although an amendment would be required to confine election of the RVP to only the electors of that region. In this regime, either the remaining national caucus or each regional caucus would enact its Joint Budget Resolution, taking into account regional spending and economic conditions, which would be signed or allowed to pass by the President at the recommendation of the RVP. The regional caucus would enact the VAT rate and spending bills, with a balance requirement, automatic enactment of appropriations by the start of the fiscal year and sequesters and VAT rate adjustments if the budget is out of balance.

The second ballet relates to the recent tax law. We are on record predicting that enactment of the Fiscal and Job Cuts Act (not a typo) will restrict wages and cause other labor cost savings so that executives can cash in on the lower tax rates by earning higher bonuses, so that any economic gains (and growth could come faster) would be from deficit spending. While some companies gave very visible bonuses for the holidays, they did not als0 increase salary levels noticeably. Productivity has made huge gains but wages have not, mostly because employers have a market advantage in the down economy, which is good for CEOs and donors, but bad for the nation.

The tax law was a classic piece of Austrian Economics, where booms are encouraged, busts happen with no bail outs and the strong companies and best workers keep jobs and devil take the hindmost. It is economic Darwinism at its most obvious, but there is a safety valve. When tax cuts pass, Congress loses all fiscal discipline, the Budget Control Act is suspended and deficits grow. Taxpayers don’t mind because bond purchasers are sure to pick up the slack, which they will as long as we run trade deficits, unless the President’s economic naivete ruins that for us.

We remind the Committee that in the future we face a crisis, not in entitlements, but in net interest on the debt, both from increased rates and growing principal. This growth will only feasible until either China or the European Union develop tradeable debt instruments backed by income taxation, which is the secret to the ability of the United States to be the world’s bond issuer. While it is good to run a deficit to balance out tax cuts for the wealthy, both are a sugar high for the economy. At some point we need incentives to pay down the debt.

The national debt is possible because of progressive income taxation. The liability for repayment, therefore, is a function of that tax. The Gross Debt (we have to pay back trust funds too) is $19 Trillion. Income Tax revenue is roughly $1.8 Trillion per year. That means that for every dollar you pay in taxes, you owe $10.55 in debt (although this will increase). People who pay nothing owe nothing. People who pay tens of thousands of dollars a year owe hundreds of thousands.

The answer is not making the poor pay more or giving them less benefits, either only slows the economy. Rich people must pay more and do it faster. My child is becoming a social worker, although she was going to be an artist. Don’t look to her to pay off the debt. Your children and grandchildren and those of your donors are the ones on the hook unless their parents step up and pay more. How’s that for incentive?

If you cut entitlements, growth will be reduced, although wealthier Americans will have more money, which will lead to asset inflation and another sizeable recession, akin to 2008. We had been worried about entitlement cuts, we no longer are. The votes are simply not available in the Senate to enact them.

When Social Security was saved in the early 1980s, payroll taxes were increased to build up a Trust Fund for the retirement of the Baby Boom generation. The building of this allowed the government to use these revenues to finance current operations, allowing the President and his allies in Congress to honor their commitment to preserving the last increment of his signature tax cut.
This trust fund is now coming due, so it is entirely appropriate to rely on increased income tax revenue to redeem them. It would be entirely inappropriate to renege on these promises by further extending the retirement age, cutting promised Medicare benefits or by enacting an across the board increase to the OASI payroll tax as a way to subsidize current spending or tax cuts.
Those who object to entitlement spending likely object most to its redistributive function and would strengthen those reforms that allow wealthier savers to retire with more while the poor have less. We absolutely object to that. It is not what we would call an American action.
The problem with entitlements is not overspending, but too drastic a set of tax cuts on the wealthy. If Social Security or Medicare is suffering, and it is not, then changing how revenue is collected fixes the problem easily. Simply lower the employee contribution to FICA so that rich people get less, decouple the employer and employee contributions with the employer contribution funded to each worker EQUALLY (without regard to income) and through a subtraction VAT or Net Business Receipts Tax with no cap, as per our standard recommendation.
Our tax reform plan alters how we deal with entitlement spending, including Social Security, by shifting payroll and a good bit of income taxation (including pass-throughs) to a subtraction value added tax/net business receipts tax (NBRT), where certain entitlements can be shifted to employers in lieu of paying a portion of the tax, with this encouraging both employment and participation in training programs in order to have access to social services.
These deduction and credits could include everything from the last two years of undergraduate and graduate education to a more robust child tax credit to health care reform that encourages hiring medical staff directly (thus matching the incentive to cut cost to the ability to do so) to retirement savings in lieu of Social Security, although the savings should be in the form of employer voting stock rather than unaccountable index funds run from Wall Street. These reforms can be hammered out next year or in the next Congress, but the right tax to hold them is clearly the NBRT.
The NBRT could be national or regional, with health care taxes or exclusions and the child tax cut all based on the regional economy, as recommended by economists in the central government who would all be moved from Commerce and Labor to Treasury, along with the Census. The mix of entitlements and tax expenditures would be set by region according to how each is used and ow poverty and employee-ownership are affected (and personal accounts would fund employee ownership, not Wall Street speculation) and accounts would be insured.
This plan gives regions an incentive to cut discretionary spending and transfer entitlement functions to employers, as well as to encourage the wealthy to finally pay their fair share of taxes to virtually eliminate the debt. It gives Congress, nationally and maybe regionally, an incentive to get its work done (until it has no work). It is everything even the Tea Party would want, except it is also good for workers and the poor. We dare you to consider it.
Thank you for the opportunity to address the Joint Select Committee.  We are, of course, available for direct testimony or to answer questions by members and staff.