The Penny Plan

We talked a week ago about taxes in the blog entitled "A Matter of Fairness." I commented at the time that there were reasonable solutions to our Federal, State, County, and Local Government deficit problems. The One Percent Solution is a simple, effective plan. It is a powerful yet practical answer to our financial malady. It has a distinct advantage over aggressive slash and cut programs in that it is not likely to trigger a recession, such as we are seeing in Greece, Spain, and Italy. Quick massive cutbacks by government seem like a viable solution, but the approach is similar to amputating a limb when a drip antibiotic will eventually take care of the infection.

Most Americans of either party would like to see the U.S. placed on a sound fiscal footing. Our future prosperity depends on it. The penny plan would reduce federal spending by $7.5 trillion over 10 years and balance the budget by 2019.

Here is how it works:

The government cuts one cent out of every dollar of its total spending (excluding interest payments) each year for six years, and then caps overall federal spending at 18% of national income from then on. These are real cuts, not "cuts in increases in spending above the given, existing baseline." The Plan provides for Congressional discretion in that the total must be reduced by 1% of last year’s spending. Thus, if Congress decided one program was going to increase, it would mean an offsetting decrease would have to be found in another program(s).

The positive financial impact on the U.S. would be huge. We could begin to pay off our debts and reduce transfer payments (interest payments) to foreign entities. We could also dial back on tax hikes and therefore leave money in the private sector where it will accomplish the most good and raise the standard of living for the nation. It would also provide for a tax basis and economic climate that will attract Foreign Direct Investment. All of this creates jobs, opportunities, and a brighter future for our progeny.

I am often asked if the plan has any chance at all on Capitol Hill. In fact, it does. The One Percent Spending Reduction Act of 2011 was introduced by Congressman Connie Mack (R-FL) and Senator Mike Enzi (R-WY) and is currently supported by 70 Members of the House and 8 Members of the Senate.

My wife and I were out to dinner Sunday night with some friends. They were filled with gloom and certain that the country cannot regain its financial footing. Perhaps that happens when you dine with an economist, but I thought you would like to know that there are reasonable solutions to our problems and that not all is lost. Please visit The One Percent Spending Reduction Act of 2011 or www.onecentsolution.org if you would like more information.