Debt & Sacrifice In America: Should 1% = 1%? by Francisco Barragan

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Federal Revenue by Source

Federal Revenue by Source

(First posted in August, just before the current “Occupy Wall Street” movement)

It is very clear that in the current debate of Annual Deficits, Debt Ceiling, and National Debt, our elected officials are more interested in scoring short-term political points and in posturing, rather than in acting as elected leaders of a nation in crises and focusing on the long-term well-being of our nation.


Our solution lies in looking inward to America’s values and principles, and to the character that made America great and unique in the world, and a willingness and readiness to make and be determined about our difficult choices.  We can no longer afford to kick our responsibilities down the street for a later generation.

America reached its soaring heights because of our work ethic, our willingness to embrace the contributions of immigrants, the facilitation of innovation and entrepreneurship, and most importantly because we built a strong middle class that shared in the fruits of our nation’s labor and productivity.

A Unique 1%

And America became the envy of the world as we exported our goods, services, and our freedoms and our ideals.  But our freedoms and ideals were never free.  They required the sacrifice of our nation’s military, veterans and our families.  Our military and our veterans have always been a unique 1% of the population – As a nation we have come to expect much from them.  And they always shown us through sacrificing personal well-being, personal wealth, and with their own lives that our country is and must always be first!

Guidelines Forward

First of all, there must be a clear recognition that one party’s win is/and has been a loss for America.

Secondly, stop the blame game.  There must be a clear recognition by all that America’s problems did not start in any particular Presidential administration nor in any particular Congress, but that it has been continued by all, and at times, intentional or not, made worse by some more than others.

Thirdly, there must be a willingness to compromise and to consider any and all solutions.

Fine Balancing Acts – We must lower our Deficits, and our National Debt

Our National Economy is about $14 Trillion per year.  Our National Debt Limit is also about $14 Trillion.  But our long-term TOTAL UNfunded National Debt is about $65 Trillion.  The biggest components of our Total Unfunded National Debt consists of Trillions in Social Security, Medicare Parts A, B, and D.

TOTAL Unfunded Debt (US$ in Trillions)
Years —> 2000 2007 2009
Future Social Sec $3.8 $6.8 $7.7
Future Medicare Part – A 2.7 12.3 13.8
Future Medicare Part – B 6.5 13.4 17.2
Future Medicare Part – D Zero 8.4 7.2
Total Social Sec + Medicare $13 $40.9 $45.9

A Simple $8 Trillion Solution

Medicare Part D was passed in November 2003 by the Bush Administration.  This law violated basic free-market principles because it prohibited a federal agency (HHS) from negotiating Price & Volume discounts.  This problem is compounded in the US because we subsidize the world’s prices on pharmaceutical products.  We must reverse this giveaway, and allow HHS to negotiate Price & Volume discounts in the purchase of pharmaceutical products for a savings in this category of $8 Trillion.  Previously we went from zero Cost to about $8 Trillion additional costs (see slide 17 for 2000 & 2007 numbers).

For 2009, see Financial Statements of the US Govt. page 12 & 13 of 14 – “Present Value of Future Expenditures Over Future Revenues”.


Create Jobs and Solve Health Needs – $35 Trillion Solution

And our Deficits and Annual and long-term Debt is made worse by this near depression recession, and by the fact that we will have about 75-80 million baby boomer retiring out of a total US population of 300 million.   An aging population that lives longer requires more health care.  Since Medicare represents about $30-$35 Trillion of our National Debt, we have the opportunity to address both unemployment and our single largest component of the National Debt at the same time.

But this requires a “sputnik” action.  We must invest in creating more nurses and doctors, and more clinics and hospitals.  When I was in the US Marines (1987-1994), I attended a US Naval hospital off Keller exit off I-580 in Oakland.  This was a top-notch facility with top notch naval doctors and medical personnel.  Sadly, this high-rise facility has been vacant and dilapidated for several years.  I see this often, because I visit a good friend that lives about 1 mile away.  We can reverse this.  By investing in our people, and in our life sciences, we will create millions of jobs across America (that cannot be off-shored nor out-sourced.), and we will tackle the Long-Term Unfunded National Debt.


We must make infrastructural investments that pay dividends

Successful companies forgo higher profits in the short-term by making Research and Development investments (a current expenditure); for the expectation of product and service innovations resulting in greater sales and thus greater profits in the long-term.

  • We must invest in technologies of the future and the “greener” the better.
  • We must invest in technologies that increase our national security, that free us from foreign dependencies, and which are protective of our environment and finite resources.
  • We must invest in education vs paying the higher social and fiscal consequences.

Benefiting the top 1%

In the last several years and decades, America’s middle class has benefitted the top 1% of our society several times.  For example, in the fall of 2008 America transferred about $1.2 Trillion in Direct Cash to wealthy financial institutions plus about $18.6 Trillion in Indirect Guarantees.  AIG alone received about $185 Billion – a top manager of theirs received about $120 million bonus because of this bailout.  Citibank and Bank of America received about $50 billion each.   And the top executives immediately turned around and gave themselves about $5 Billion in bonuses again because of these tax payer funded bailouts.


1% must equal 1%

There is a reluctance by both parties to raise revenues, in great part to successful lobbying by groups or individuals –  as if the top 1% of our most privileged society was a sacred cow.  Yet this is opposite to most pragmatic or realistic solutions.  The focus cannot just be on cutting costs and on borrowing.

There must be an open mindset to raising revenues, which may come either or both from reducing or eliminating certain subsidies, or certain tax preferences, or as a last resort enacting or raising certain taxes.

According to the Peter G. Peterson Foundation, “To keep deficits and debts from reaching unsustainable levels, revenues will have to increase substantially, spending will have to be cut substantially, or some combination of revenue increases and spending decreases will have to be enacted”.

For example, subsidies to extremely profitable industries can be eliminated i.e. the oil industry; corporate farmers, and others.  Additionally, mortgage deductions can be limited to $500K – $750K of the primary residence, and not allowed for all other mortgages.  The government does not need to be subsidizing expensive homes.

Having an open mind to various solutions, though politically difficult, can help bring back confidence and certainty to businesses.  The consequences of failing to act comprehensively and expecting more from the top 1%, can result in “indirect taxes” to the middle class and to our economy.  For example, Consumer Spending accounts for about 65-70% ($9.1 to $9.8 Trillion) of our annual economy of about $14 Trillion.  So if you assume a higher cost of about 10-20% on consumer spending, this translates to about $1-$2 Trillion of additional “tax” on the middle class.

So if in the past, if our American middle class has borne, or may continue to bear the heavy cost of financial misdeeds or fiscal mismanagement by others, or if in essence 1% of our population (our military) have sacrificed even their lives, for the well-being of our ideals, our freedoms and our way of life, I know it is only fair to ask and expect financial sacrifice from the privileged 1% of our society for the well-being of our nation.

Cutting spending and borrowing without raising revenue only defers and magnifies the pain.  Our future and our American way of life is at stake, but it requires contributions and sacrifices from all.


by: Francisco J. Barragan.

About Francisco Barragan