Nothing has alarmed me more recently than reading the details of the Obama budget in the New York Times which projects a deficit that will grow to 11 percent of our total economic output in 2011. Additionally, the budget projections suggest deficits will NOT return to sustainable levels over the next ten years, but by 2019 are expected to rise sharply to more than 5 percent of the gross domestic product. This outlook, following the Republican administration’s spending spree in the latter years of their term without any efforts to pay for those increases, is a severe indictment of our political leaders.

It is no exaggeration to say this puts our national security at risk, erodes our leadership position in the world and threatens our standard of living.

The government uses a traditional budgeting process, albeit much more complicated than business. Essentially, it’s a bottom up approach where all departments and agencies of government build their budgets and submit them to the White House for approval. Then it’s up to the President to make whatever adjustments he feels are appropriate, influenced largely by political considerations. When the budget goes to congress for approval, local and regional interests take over and the numbers are tweaked unsparingly.

In essence, the hot button political issues in a given year are the areas that get the funding increases without regard to providing for the out years. For example, the country’s infrastructure has been ignored for years and continues to deteriorate although the President has made this one of his many priorities.

The country’s situation is serious and calls for a fundamental change in the way the government budgets. Without knowledge of the constitutional or legal issues involved, I would like to see a top down budget process where the public takes a one time, binding vote to set the country’s budget number and budget deficit ceiling for 2011. The 2011 budget number could not be less than the 2010 budget.

Economists say budget deficits should not consistently exceed 3 percent. However, the administration’s budget projections call for 3.6 percent each year for the next 10 years. The public vote would bind the administration and congress to reduce the deficit below 3 percent by the end of 2013 and three years after that, reduce it further to 2.5 percent. Thereafter, future administrations would be bound to deficits of no more than 2.5 percent. The only program exempt from the resulting cuts would be National Security which should include NASA.

For example, in 2011 the National Security budget is approximately $782 billion and Iran threatens the Persian Gulf prompting the United States to take action to forestall their aggression at a cost of $100 billion. When the administration prepares the 2012 National Security budget, it would use the $782 billion figure for the 2011 deficit calculation rather than $882 billion.

If the politicians don’t have the will to take action and they fail to meet these financial accountability goals, there would be consequences. The voters would become engaged. If the deficit has not been reduced to less than 3 percent by the end of 2013, the Democrats would present a set of budget cutting options, as would the Republicans, and a public vote taken on which plan to adopt. If neither plan receives a majority vote, the parties would submit revised plans. The same process will be used again if the 2.5 percent deficit goal is not achieved by the end of 2016.

The top down approach means the administration and congress would be pressured to work together in finding a solution to the growth of entitlement programs and find common cause in ways to bring them under control. It also will weigh heavily on the administration to find better ways to grow the economy and create jobs to get the revenues that would enable them to meet their deficit reduction goals, legislate new programs or expand existing programs.

If and when an increase in the national debt became necessary, another public vote would be taken if the administration and congress have not met the deficit reduction goals. This will help refocus Washington politicians from spending on their favorite projects to rebuilding a strong financial engine that will restore our world leadership.

However, the greatest benefit of a top down budget approach is to put power back in the hands of the people. We gave them the power, so let’s take it back. Can it be done? Let’s ask the voters.

It’s a more or less meaningless cut that would pander to PO’s base, but provide no significant impact on the economy. Sort of like rearranging the deck chairs on the Titanic.

What would help the economy would be to renew the Bush tax cuts and halt all initiatives such as health care reform and “cap and trade” which are causing businesses to freeze expansion.

Virtually every tax payer will see an increase in taxes when the Bush cuts are allowed the expire.

Businesses will not expand until they have some confidence in their future costs and have confidence in the economic recovery – neither of which they have now.

The impression portrayed is, if you work for the government you do not have to worry about debt.

The statements made in the state of the union and the points in this article cause a slippery slope, that with an excellent education hope to prevent.

Also, the income levels are very, very, very generic.. the limit imposes in some areas are considered “rich”, while in some areas are considered poor.

Geographic income limits are more appropriate.

Providing “benefits” to one group always impacts another group.. “spreading the wealth” does not fix the problem, it just moves the problem to another area.

with globalization, the only thing that will keep us competitive is education. i think it’s terrible policy to have income phase out limits on student loan interest. i just don’t understand why we would want to penalize persons who are smart from taking high paying positions. backwards policy if you ask me.

you obviously don’t have a good understanding of the tax code. reincorporating to a c-corp will subject the owner to double taxation. the profits to the c corp would be taxed and then you’d be taxed again if you gave out a salary at the individual level. while salaries may be deductible to the corporation, you assume that the person’s salary would equal the sum of the corporation’s profits, which is not a reasonable assumption.

jon’s premise is correct, people don’t work for poor people, except for odd jobs here and there.

i’m not a fan of obama nor am i fan of bush. i can’t wait till the economy contracts with all of the new taxes on the “rich.”

Just do a search for IBR. I am surprised more are not familiar with this.