To reduce debt you have to either raise taxes or cut spending. I say we do both.
1. Revenue increase
In 1980, our debt was 809 billion and with inflation put in, maybe we could put that number at 1.5 trillion or so. Not terrible, but not great either. With large tax decreases from the upper class used to stimulate economy (which it did, relatively), we saw growth in America but stagnant wages and an increase in debt to 4.0 trillion dollars or 64% of GDP at time by 1988 which was supposedly the end of the Reaganomics big money 1980s.
With thoughts on controlling debt problems in the 1990s, our government worked at downsizing military from 1980s Cold War model and setting up reforms to social problems such as Welfare reform, past a balanced budget and debt did go down slightly to 57% of GDP, still not great but going in right direction.
Of course, we know that 2 wars and a financial collapse has put us in the current situation we are in. Whether you blame Bush for his Medicaid and deregulation putting us at 10 trillion at the end of his administration or Obama with his deficit spending putting us at 14 trillion, the debt has reached a pinnacle point to which leaves America in a dire place.
Revenue must be increased by going back to the Bush tax cuts first to the wealthy, 36 to 39 percent first to Clinton era tax times. These tax breaks have not created jobs and if they have, globalization has forced those jobs overseas. An increase of 3% would increase tax revenues to close to a trillion in 10 years.
Also, tax language must not allow for improper taxation of Americans. If we are counting every billion, US federal tax makes up the larger revenue generator, so keeping it at a higher level should help in the revenue game.
2. Decrease military spending
The largest debits in the American system is social security, medicare/medicaid, and military spending at $807, $705, and 695 billion. To curtail military spending decreasing it 100 to 200 billion would enable us to take care of our defenses and help the growing debt. How?
Leave Afghanistan and reduce troop levels in old World War II bases of Japan and Europe. The wars of Afghanistan and Iraq has cost as of now 1.8 trillion dollars with projections putting them at a total cost of 3 trillion dollars.
To put that into perspective, World War II when corrected for inflation costs America 5 trillion. 16.7 miilion enlisted. Hundreds of planes made. Tanks deployed. Fascism ended. And America reaped the reward of world dominance afterward in the crumbling infrastructure of the world rebuilding while the US just kept humming.
We are not in that world anyway. Globalization and rising BRIC countries put the United States nowhere near the manufacturing megapower it was then and our crumbling job creation cannot keep up with the 3 trilion we lost.
End the wars now. Keep the military what it is for the United States: a subsidized job creation machine for troops and armed manufacturers to help fuel economy.
3. Create a new social safety net: The Private-Public Option
America is number in health care for one reason and one reason only: Reciprocity, meaning that we’re the best in getting care the quickest. This is wonderful because it shows that the infrastructure of our care is great.
But that’s not the whole story. The United States has the worst infant death out of any Westernized nation. Lower life expectancy. Higher obesity rates. And double the costs out of everyone. So, the real story is overall, the United States is ranked 37th and for a country that pays double per person than any country on Earth, the costs don’t add up and that’s at 20% of our GDP or taxable revenue (remember that?)
Businesses now keep people alive, but health care costs are skyrocketing. It makes no financial sense for business to be in business of health care for their employees if they do not have to. Equally to that, they can get cheaper and less effective plans which means higher costs put on consumers to go it alone in private insurance. Adding additional cost of the no safety net people who have no health care actually driving up costs as well, and you have a big mess.
Of course, the reciprocity is still there though. It is true, we have some of the best care in the world. It’s just the best you can buy. If you are the working poor, it’s hard to come by.
Put these together in an idea of a safety net allows for funding to go into the health care safety net. Just as you are taxed for Medicare/Medicaid, we should have a health care safety net, especially if you are unemployed. You can opt for instead of your full unemployment, you can have let’s say 15-20% of that given to a public health care plan.
The private system still exists when you find your job. Medicaid/Medicare still exists for seniors. It’s not social security. That’s monetary. This is health security and deserves a look.
Many countries have this model. While it may not be completely perfect, our current system is flawed and its debit losses are growing the debt.
4. Regulations
Getting rid of regulations leads to more revenue loss. Destruction of infrastructure (bridge collapse, Katrina), financial disaster, environmental catastrophe (BP oil spill), and health care fraud to name just a few.
Small government means getting it out of our lives, but not regulating what we pay for. Everything has checks and balances in private firms. Without them, cost efficiencies and profit margins wouldn’t work.
Regulations do good and putting more emphasis on good regulatory practices rather than bad ones makes for good business for America.
5. Finding our next manufacturing base
The only thing America is manufacturing right now is ideas. Ideas on innovation: good. Ideas on financial manipulation: bad.
Biotechnology, information technology, globalized supply network chaining, and energy production have been acknowledged as key future pursuits of a growing world. The United States must be a key player in all of these sectors to mitigate any residual loss already occured in its missing manufacturing base.
Right now, the American economy is now a service economy, but technological innovation is shrinking that economy. There will be no need for cashiers, tellers, waiters, mail men, receptionists, and a whole slew of jobs will not exist in the future.
Those above-mentioned jobs will require higher education levels where information technology should be a dominant thought in primary school. Education should be appropriated toward these bases for it will be the future of job growth.
Neglecting education towards these sectors will keep the American worker out of the future world economy which means less tax revenue and less chance for debt reduction.
On top of these problems because we just consume world goods we do not make, we have a huge trade deficit, currently, worst in the world, $800 billion or so. We have over 4 trillion in debt to the countries of the world. With deficits that drastic and a shrinking service economy, America is poised for more unemployment and more need for investment from other countries, further debilitating our world power structure.
6. Spending limits and controls
Republicans are currently trying to pass spending limits on appropriations in Congress. You know what that is: regulation, a word they typically hate.
In many ways though, this makes sense. Cutting spending on careless subsidies that only benefit a small number of Americans does not make financial sense and capping discretionary and appropriation spending via Congress can “regulate” the debit sacrifices of our hard, earned and by my ideas, more taxed dollars.
7. Reform social security
Eliminating the best insurance policy for Americans would be a mistake, but not reforming it would be a bigger one.
People are living longer and heavy manufacturing will not be the back breaking toll it was when social security was created. Increasing the age of social security keeps it in line with common times.
Think of adding age to say 70 to social security as inflationary such like the inflation of currency. With less stressed bodies and better care (hopefully with private-public plan), America will live longer and more productive lives both at home and their jobs. This reform is necessary to helping curb this debt and must be open for discussion.
Of course, you cannot cut spending to solve all these problems. That makes up the small pieces of the pie. The big pieces are social security, Medicaid/Medicare, and military spending. Those take us up and up towards debt.
Less taxation at the top has not created jobs. Globalization takes those. The jobs and revenue for the future is in a highly-educated, competent workforce with a government that subsidizes true “winning the future” motives. America cannot create capital out of nothing to give it away to manufacturing basis around the world. It must invest that capital into itself in education and correct reform to make the future bright and hopefully, as debt free as possible.
Christopher Manfredi, UH/GA