Fixing the Federal Fiscal Mess Is Simple… But Not Easy

Written and copyrighted by: John H Ramsey, Founder  Project (BOFR) https://bofrusa.com/

JUNE 2024

When they built our great Constitution our founding fathers gave us a durable playbook that is still going strong nearly 235 years later. But they didn’t finish the job. They didn’t establish any rules to properly process and safeguard all the money we send to our central government every year.

In 1789, our first full year under our Constitution, the budget of our federal government was $4 million. Today’s federal budget is over $4 trillion, one million times larger. We need Constitutional rules now more than ever but nothing has yet been done to put any of those needed rules in place.

As a result of years of fiscal free-for-all, the depth and breadth of our federal financial problems are so serious that if we fail to overcome entrenched individual and institutional interests our nation could face financial ruin.

We The People need to step up and put in place enforceable, common sense rules in our Constitution about the proper use of our money by our governments and the limitations or rules which our governments, especially our Congress, must observe to properly use the fiscal powers that we lend them.

The good news is that solving our federal government’s fiscal mess is simple, because it is firmly rooted in common sense. And once focused and committed We The People are very good at supporting common sense. Thomas Paine taught us that.

There are five interdependent parts to the federal fiscal mess that need to be solved together. When one describes in plain and straightforward English how each of those five component parts is operated presently by the federal government, and then applies common sense to the solutions, the way forward immediately start to become clear. Let’s take a closer look…

SOCIAL SECURITY AND MEDICARE

THE PROBLEM:

The payroll taxes we and our employers have paid for our retirement (Social Security), and for our senior years’ health care (Medicare), and into other federal trust funds have been misapplied by Congress to pay other government bills, denying our citizens the benefit of decades of cumulative compound returns that could have accrued from prudent investment of those tax receipts by fiduciaries over the 45 plus years of our working lives.

Currently, the solvency of both Social Security and Medicare are entirely dependent on significantly more workers paying into the systems than beneficiaries receiving benefit payments. The ratio of available workers to beneficiaries is declining and both Social Security and Medicare funds are approaching insolvency. Future liabilities under Social Security and Medicare are the major component of the present unfunded future liabilities of our federal government that experts tell us are approximately $160 trillion.

BOFR SOLUTION: Amend the Constitution to…

Change the systems for all new participants so the money we pay in gets invested by independent teams of investment professionals acting as fiduciaries over our 45 year working lives, free of Congressional interference. Experts tell us that if we did that the average Social Security check at the end of our working lives would be at least twice as much as is currently being paid, and the system paying those benefits would be solvent and secure.

Repay immediately the trillions of dollars borrowed to date from Social Security and Medicare and invest that money to help existing participants maintain current benefits.

Separate upon receipt the payroll taxes that we pay for our Social Security retirement, disability compensation, Medicare, and other federal trust funds from other government receipts and maintain custody of these trust fund deposits in the Federal Reserve System.

Forbid Congress from withdrawing Social Security and Medicare funds to pay other government bills.

Enable independent auditors to account for the custody and investment results of these funds.

FEDERAL SPENDING, DEFICITS, AND OUR NATIONAL DEBT

THE PROBLEM:

It took 183 years, from 1789 until 1972, for our nation to produce our first $1 trillion of gross domestic product (GDP) which is the sum total of all goods and services we produce in a year. By 2023, just 51 years later, our GDP has grown to $27.36 trillion, and yet we have produced more national indebtedness from 1972 to 2023 than we did in the 183 years before it, combined.

Unwilling to tax ourselves to finance all this spending, we have accumulated a national debt that is approaching $35 trillion, about 128% of current GDP.

Despite extensive public dialogue over a long time, no committee of Congress or sitting President, of either political party, has produced a credible solution.

BOFR SOLUTION: Amend the Constitution to…

Forbid the Congress from spending more than its operating revenues (tax receipts less trust fund payments to Social Security and Medicare) unless there is a declared emergency, which requires a super majority of both Houses of Congress and The President.

Repay from the first tax receipts each year, in regular installments of at least $500 billion per year, the massive amounts of accumulated federal debt.

Give our President the line item veto to unpack lengthy complex appropriations legislation designed to fund projects and interests that otherwise could not stand on their own.

TAXATION

THE PROBLEM:

Our tax code is 75,000 pages long and is full of special tax breaks and so-called incentives, so 56% of our people and 20-25% of profitable corporations pay no federal income tax while our nation is drowning in debt.

The total of legal tax avoidance (the IRS calls them tax expenditures) is $1.6 trillion per year, an amount of money equal to 72.7% of the $2.2 trillion of income taxes the federal government actually collects. So what are the odds of getting audited? Very low. Only .2% of all individual income tax returns filed for the 2020 tax year faced an audit, according to the most recent data available from the IRS. That means about 1 in 500 tax returns are audited each year.

Another $650 billion each year is siphoned off in illegal tax evasion, according to the IRS, an amount of money equal to 29.5% of the amount the federal government actually collects. Further, The Commissioner of The IRS said in Congressional testimony that the total of tax evasion is closer to $1 trillion per year when the effect of crypto-currencies is included.

That would bring the total of taxes owed but unpaid to $2.6 trillion, more than 118% the taxes actually collected, and all because of illegal tax evasion that is not pursued, and by a system of legal tax avoidance that is so complex it cannot be efficiently enforced.

BOFR SOLUTION: Amend the Constitution to…

Eliminate the use of our tax system to dispense favors and privilege by complex deals, exemptions, deductions, exceptions, and a lengthy, secretive tax code. In short, abolish the Internal Revenue Code and start over.

Require that our federal government use our tax system solely to fairly, broadly, and efficiently tax all our people and all our businesses enough to finance the legitimate operations of our government and no more.

ACCOUNTING AND INDEPENDENT AUDITING

THE PROBLEM:

America’s federal government is the only element of government in our country not subject to generally accepted accounting principles, independently promulgated by experts, and independently audited on time by public accounting firms with full transparency and timely reporting to citizens, including a full explanation and official acceptance of responsibility by leaders and managers for the outcomes of the agencies they lead.

In fact, the U.S. Government Accountability Office (GAO), the investigative arm of Congress reports there has never been a comprehensive, government-wide review of fraud since the nation’s founding 235 years ago.

Our nation’s largest agency, the Department of Defense (DOD) has never passed an audit, despite years of attempts, according to recent testimony by the GAO. Accounting problems led the GAO in 1995 to put DOD financial management on GAO’s list of agencies that are at high-risk of waste, fraud, abuse, and mismanagement.

The $600 billion Pentagon inventory of weapons systems and other items failed to include tens of billions of dollars of defense equipment that other records showed they had. Moreover the GAO found that about 58 percent of the material the Pentagon possesses ($36.9 billion worth) are items it does not need.

Yet there has been no financial penalty assessed by Congress and large annual appropriations to DOD continue unabated.

BOFR SOLUTION: Amend the Constitution to…

Require Congress and the Executive Branch agencies to properly account for the money received and spent according to policies/rules developed by a Board administered by the independent Financial Accounting Foundation, a successful and independent nonprofit that has been providing accounting policy to governments and private sector businesses for over 50 years.

Independently and annually audit every federal agency and department and thoroughly and timely explain to Congress and to the public our government’s financial activities and results.

Stipulate that failure of any agency to pass an independent annual audit will result in required, progressively increasing reductions in that agency’s funding.

REGULATIONS

THE PROBLEM:

Our national book of regulations is 170,000 pages long and according to Steve Forbes costs our economy about $2 trillion a year. Yet ironically, the process of regulation is largely unregulated, does not have to derive its specific authorities from law, and as a practical matter is protected from independent judicial process.

Administrative Courts to consider disputes from regulated entities are staffed and managed by the regulatory agencies themselves and are not part of the independent judicial branch of government. Predictably, these captive courts most often side with their affiliated agencies, thus seriously compromising the rights of citizens and of businesses to protect themselves from the arbitrary promulgation and enforcement of federal regulations.

BOFR SOLUTION: Amend the Constitution to…

Establish impartial, fast track Administrative Courts as part of our judicial branch to resolve disputes between citizens and federal government regulators.

Require proposed regulations to be specifically authorized in law.

The formal language of a Constitutional Amendment, or any legal pronouncement, can be intimidating, and while necessary, can come later. For now let’s get broad agreement on the simple, common sense version of what needs to be done.

So why is this package of common sense reforms not as easy as it is simple?

While simple, solving the federal fiscal mess is not easy, for two reasons. The first reason is there are several moving parts, and they are interdependent. We must therefore resist the temptation to disaggregate the pieces and try to deal with one at a time over what might be years.

The difficulty with incrementalism is that because the pieces are interdependent, there is no solution until all the parts have been fixed.

The second reason why solving the federal fiscal mess is not easy is that the elected and appointed officials at both the state and federal levels are hopelessly conflicted and cannot act independently of those conflicts. And many of them are motivated to keep the present system in place, even while knowing it hurts their country.

We know Congress won’t act because they caused the problems in the first place and successive Congresses over 235 years have failed to fix them. Perhaps this is because members benefit from things the way they are, because their political power has flourished in the absence of clear rules in the Constitution that might check that power.

Then why can’t the states solve this and convene an Article V Convention, propose the necessary amendments and send them back to the states for ratification? That’s what the Article 5 movement has been about for more than the past half century, but has yet to succeed.

Perhaps it is because the states have become hopelessly conflicted. They have accepted so much federal money that now on average 35% of state budgets are financed by the federal government. The states have compromised their independence as contemplated by Article V of the Constitution.

Even if elected officials were not conflicted, legislatures would be hard pressed to ratify required solutions to the federal fiscal mess unless their members can be confident that the people they represent understand and support the amendments and have made their will clearly known.

So that leaves us, We The People. There is no one else. This is what wise forebears warned us we might have to do. So before we are given new laws or Amendment(s) by a temporary or permanent government institution, let us start the national conversation that many, I suspect most of us are eager to have.

We need a We The People’s Fiscal Commission charged with producing non-partisan and/or bi-partisan solutions, developed independent of both the States and Congress, consisting of clear Constitutional process amendments to control the behavior of Congress, for the benefit of all Americans– young and old, from left, center, and right, of modest and significant means.

A model for the output of such a We The People’s Fiscal Commission is The , BOFR for short, that will require adherence to specific Constitutional instructions, with penalties for non-compliance, in each and all of the five parts of the problem:

• Social Security and Medicare
• Spending
• Taxation
• Accounting and Independent Auditing
• Regulations

It is four pages long in total. Here is the suggested formal text: https://bofrusa.com/bill-of-financial-responsibilities/.

Recommendations of a We The People’s Fiscal Commission must be shared in a sustained and extensive multi-media national messaging campaign to enlist broad, active support of citizens so that if/when an Article V Convention takes place, and/or Congress takes up new amendments, citizens will be all in to advocate these specific, broadly supported solutions to bring our nation back from too many years of fiscal malpractice, while we still can.