Despite Joe Biden’s comments to the contrary in his recent State of the Union speech, the state of our nation is not stronger than ever. Although we are currently still a great nation, we have some serious problems. Among these are a loss of respect around the world that began with the botched Afghanistan withdrawal, an unsecure border that allows people and drugs to flow freely into our country, crime that is out of control, an almost religious obsession with climate change on the part of too many of our leaders that is resulting in very poor decision making on energy policy, inflation that is out of control, and too few of the goods that we buy on a daily basis are made here at home. The problems listed are only the tip of the iceberg, but you get the picture.
Although not listed above, Joe From Texas believes that none of the problems we face is more significant than our national debt and ongoing government spending problems. In 46 of the last 50 years, our government has spent more money than it has taken in. This has resulted in the government borrowing money in those 46 years to fund the shortfall. From the founding of the United States in the 1700s up until 1992, our total national debt was just over 4 trillion dollars, meaning that in it took over 200 years for us to accumulate $4 trillion in debt. However, in just the last 30 years, from 1992 through 2022, we have managed to pile up over 8 times as much debt to the point where our national debt is now almost $32 trillion. This trend is not sustainable. If we do not take steps to reverse this trend very quickly, Joe From Texas is convinced that it will be catastrophic for our country’s future. (sources: https://www.thebalancemoney.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287, https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/)
There is an old saying that states, “if you find yourself in a hole, the first thing to do is stop digging.” In the opinion of Joe From Texas, our country is in a big hole, and we need to follow the advice to stop digging. We need a plan that can get us to a balanced budget within a relatively short period of time, perhaps 3 years, and we must then work to maintain balanced budgets moving forward. For the record, it should be stated that in Fiscal Year 2022, the federal government took in $4.90 trillion and spent $6.27 trillion, resulting in a budget deficit of $1.38 trillion. (source: https://fiscaldata.treasury.gov/americas-finance-guide/national-deficit/)
It must be noted that you can quickly do a search on the Internet and find any number of people who disagree with the views of Joe From Texas regarding our nation’s spending and debt problems. Many, including some who consider themselves economists, articulate that deficits and debt don’t matter. There is little argument that they have been correct up to this point. However, are you willing to bet your future and your family’s future on unproven opinions that do not square with common-sense?
Think about it this way, if we pursue the idea of getting our financial house in order as Joe From Texas proposes, then we will have no way of knowing for sure that his fears were correct because we will have taken proactive steps to avoid what he believes would be certain disaster. If, on the other hand, we listen to the “experts” who tell us that we can continue to run up debt forever without any consequences -- and we do nothing -- we may well wake up one day to find out that they were wrong, and at that point it will be too late. Think back to the stock market crash of 1929 that precipitated the great depression or the day before we learned about the financial crisis of 2008, everything seemed fine until it was too late. Such financial disasters are like tornados -- they tend to hit with very little warning, and they do catastrophic damage. The one difference is that a tornado only impacts a few people at a time whereas a financial crisis impacts everyone at once.
The purpose of this post is not to walk through specific plans on how to balance our budget and pay down debt, it is merely to raise the alarm that we should all be contacting our members of congress and senators to put pressure on them to develop a plan for efficient spending. Given our country’s debt over the last 30 years (compared to our prior history), there is no doubt that our government has a major spending problem. That said, Joe From Texas does have a couple of common-sense ideas that can help us begin to work toward a balanced budget and perhaps provide some additional benefits as well.
One thing that we can easily do is encourage more people who are able to enter the labor force and begin working, to do so. We all constantly hear about the labor shortage in the U.S., and we probably see examples of it regularly in places like restaurants. We often see people waiting for tables when there are many empty tables in the restaurant. We know this is because the restaurant does not have enough people to properly serve all of their tables. If we could fill all jobs, in restaurants, manufacturing, and every other business sector in the U.S., it would not only increase efficiency, it would also provide a boost to the tax revenues of our government. Let’s take a look at one possibility.
In December 2022, the St. Louis Fed reported that there were over 11 million job openings in the U.S. and the Tax Foundation estimates that the average U.S. worker pays $16,000 per year for all taxes, including federal, payroll, state, and local taxes. Furthermore, the Tax Foundation estimated that the 2022 average state and local tax burden to be 11.2%. Although tax computations using averages are by no means precise, they can provide some basic information to determine whether a more precise study should be done. Based on the information that we have, let’s assume that all 11 million jobs were to be filled and that each of those taxpayers will pay $16,000 in taxes, of which 88.8% (removal of the 11.2% state and local burden) will be federal taxes. Based on these numbers, the federal tax receipts from each job would be $14,208. If we multiply $14,208 x 11 million jobs, we come up with a figure of $156.288 billion in federal taxes. Obtaining an extra $156 billion in tax revenue each year would be a great start towards balancing the budget. Although this certainly does not solve our deficit problems, it would be a solid step in the right direction. (sources: https://fred.stlouisfed.org/series/LMJVTTUVUSM647S, https://taxfoundation.org/average-us-worker-pays-over-16000-income-and-payroll-taxes, https://taxfoundation.org/tax-burden-by-state-2022/#burdens)
In February 2023, the U.S. Chamber of Commerce issued a report outlining the continued need for workers, the reasons that many people have chosen not to go back to work after the pandemic, and the fact that official U.S. statistics show that there are only 5.7 million unemployed, millions short of the number of available jobs. This raises the question: How do we fill these jobs? (source: https://www.uschamber.com/workforce/understanding-americas-labor-shortage)
One possible source of workers is people who have retired. According to Statista, the number of workers currently receiving social security retirement payments is 48.59 million people and that number is expected to continue to grow for the next several years. Although some of these retirees work, it is believed that many others avoid working because of the Social Security earnings limit, a penalty on social security benefits that takes place when people retire between 62 and their full Social Security retirement age, age 67 for most people retiring this year. Those who earn over the limit are penalized $1 in benefits for every $3 they earn over the limit. Although we could not find statistics regarding the number of retirees in this age bracket, 2021 census data demonstrated that just over 6% of the population fell within this age range. In 2023, the census also estimated the population of the U.S. to be over 333 million people which would mean there are almost 20 million people in the 62 to 67 age range. For the sake of argument, let’s assume a quarter of that number are early retirees who may consider holding down a job if there were not a penalty for doing so. That would translate to almost 5 million people potentially available to help fill job vacancies. While the actual number could be more or less, we can see that it would be significant. Although there has been an earnings limit in place since Social Security began, we are currently experiencing an unprecedented shortage of workers. Joe From Texas believes that we should be incentivizing, rather than disincentivizing, early retirees to return to work. (source: Number of U.S. retired workers receiving Social Security 2022 | Statista, https://faq.ssa.gov/en-US/Topic/article/KA-01921, Social security: Full retirement age stops changing this year (usatoday.com), https://www.census.gov/popclock/data_tables.php?component=pyramid, https://www.census.gov/quickfacts/fact/table/US/POP010220, https://www.socialsecurityintelligence.com/the-history-of-the-social-security-earnings-limit/)
Encouraging more domestic oil and gas production would also be a step in the right direction. In addition to being good for American citizens from the standpoint of reducing their energy costs, it would also have the benefit of boosting tax revenue for our government. In 2019, the United States produced just over 12 million barrels of oil per day, directly employed 2.5 million people, and was responsible for $1.7 trillion (or almost 8% of the U.S. GDP). We also know that the United States consumed almost 20 million barrels of oil per day in 2021, and the average wage for oil and gas workers that year was $112,000 - more than double the average wage of $51,000 in the private sector. If we assume these numbers are still true today and apply them, we see that the U.S. would need to produce about 8 million additional barrels of oil per day to meet its demand. If we assume that such an increase in production would translate to the same percentage increase in jobs and economic activity, this would add another 1 million jobs and almost $700 billion toward the U.S. GDP. We can also calculate the federal revenue from these jobs with findings from Tax Foundation studies. These studies found that the total tax burden on U.S. workers is 31.3%. If we remove the state and local tax burden of 11.2% from this total, we are left with a federal tax burden of 20.1%, or $22,512 for the $112,000 salary of oil and gas employees. The additional 1 million jobs would directly produce over $22.5 billion in additional taxes annually. This is before corporate taxes and economic activity multipliers are factored into the equation. (sources: https://www.eia.gov/todayinenergy/detail.php?id=43015, https://www.api.org/-/media/files/policy/american-energy/pwc/api-pwc-economic-impact-report.pdf, https://www.eia.gov/tools/faqs/faq.php?id=33&t=6, https://www.energy.gov/sites/prod/files/2020/10/f79/Natural%20Gas%20Benefits%20Report.pdf p. 45, A Comparison of the Tax Burden on Labor in the OECD, 2014 | Tax Foundation, Tax Burden by State: 2022 State and Local Taxes | Tax Foundation)
Another area where Joe From Texas believes we could eliminate billions of dollars from our deficit and future debt is by cracking down on fraud, waste, and abuse. In a 2021, Congressman James Comer penned an article on fraud, waste, and abuse for Real Clear Politics. Comer stated, “since 2003, when agencies were required to report these payments, the Government Accountability Office estimates $1.9 trillion in improper payments have been made. But that might just be the tip of the iceberg because the GAO maintains it is unable to ‘determine the full extent to which improper payments occur’.” Since Comer’s comments covered an 18 year period and he believes the GAO estimate is too low, we can calculate that well over $100 billion is lost each year to waste, fraud, and abuse. If we take the $100 billion figure and look at the same 30 year period (1992 through 2022) that we viewed earlier regarding the national debt, we can conclude that roughly $3 trillion, about 10% of our total national debt, can be attributed to fraud, waste, and abuse. (source: U.S. Hemorrhaging Money From Entitlement Fraud & Waste | RealClearPolitics)
In future posts, Joe From Texas will continue to present ideas that he believes can help us take steps to balance our budget; however, in this post Joe has presented just a few thoughts that could mean more than $250 billion annually toward this goal. Ronald Reagan once said, “there are no easy answers, but there are simple answers. We must have the courage to do what we know is morally right.” These words certainly apply to the challenges of getting our government’s financial house in order. (source: 77 Motivational Quotes That Will Give You Courage | Inc.com)