No matter who is elected, the next administration must focus on reducing the exploding national debt. Unless it is seriously addressed by Congress, $16 trn (trillion) and rising at more than $1.2 trn per year is a threat to the entire economy for decades to come.
More spending is not the answer. The current total debt is now more than the country’s annual Gross Domestic Product (GDP), almost half of which is held offshore. Current interest payments alone are $260 billion this year, which is staggering. They are now 10 percent of the national budget and projected to grow to 15 percent by 2020. The U.S. credit rating is dropping.
We have over-mortgaged our future. It’s like buying a house that we can’t afford with current income, and now we’re under water. Every person in the country is on the hook for more than $50,000, and rising. National debt is growing at over $100 billion per month. And the government fallback position is to simply print more money and create more debt — and yet it is mandatory in Massachusetts that cities and towns have balanced budgets.
The current climate in Congress is disturbingly divided. Ideology reigns supreme, no matter how extreme or self-indulgent. There is no spirit of compromise for the common good. And now, REVENGE is an emerging theme? The country is divided. We need leaders who are more concerned with fixing the economy for everyone than winning elections or pandering to special interests. Legislators must understand that unless there is prosperity overall, there will be none to share. Everyone suffers until this problem is fixed.
Singularly “taxing the rich” will not suffice. We face the proverbial “fiscal cliff,” which already has businesses and markets rattled. There will be larger, broad-based taxes on everyone, for example a reversion of the recent payroll tax cuts, taxation of investment income at ordinary rates, confiscatory tax rates on inheritance, additional health care taxes, etc. Two-thirds of the federal budget now goes to entitlements that are headed for insolvency, so how can these expenditures be ignored?
In a recent policy statement by more than 80 CEO’s in the Wall Street Journal, curtailing the debt will require both serious spending cuts and increased tax revenues on the order of 3:1 (the Simpson Boles formula), as well as entitlement reform. Singularly “taxing the rich” may be a start, but it won’t come close to solving the problem. It also will risk investment in job creation and may particularly hurt the elderly as well as pensioners who are dependent on investment and savings income.
Tax reform will be broad-based, regardless of who is elected. And fixing entitlements must be part of the solution. The fix needed for Social Security is relatively easy, although requiring political courage, such as changing income threshold, age limits and reducing disability fraud. Medicare and Medicaid costs are much tougher, but aggressively curtailing fraud and inefficiencies must be part of the solution. But how in the world can the government arbitrarily force the reduction of Medicare payments to hospitals and doctors by $716 billion without first achieving savings, and pretend this won’t affect the cost and availability of services? And all this is without even addressing tort reform or skyrocketing drug costs? When has the federal government EVER proven it can cost-effectively manage anything without simply shoveling money?
Read Bob Woodward’s “The Price of Politics” to see how politically polarized and frozen Washington is behind the scenes, and what it has cost U.S. taxpayers over the last three years alone.
Frank Remley lives in Newbury.