Wednesday, September 19, 2012

The National Debt

Lost in all of the campaigning and gaffes and international incidents and economic turmoil is the fact that is country really does have a problem with it national debt. I have already written plenty about the fact that the structural annual budget deficit of $1 trillion/year was already in place from President Bush - so I am not going to revisit that. The national debt has risen faster under the Reagan and Bush I and II presidencies than under Carter, Clinton, and Obama - just a fact. That said, there are going to have to be serious efforts to get the runaway deficit and skyrocketing national debt under control.

The economic crisis and the real risk of a total economic collapse is now gone - thanks in large part to the Stimulus. We still have slow growth, but there the macro-level indicators (GDP, the stock markets, job figures, unemployment) are all stabilized - they were in disaster mode when President Obama took office. In addition, Obamacare has greatly slowed the rising costs of health care. For about 10 years prior to the passage of Obamacare, health care costs in this country were rising by about 8-10 percent per year. They are still rising at about 3-4 percent per year which is faster than the rate of inflation but at least it is slowing. As more individuals sign up for private health insurance, it should continue to keep the rate of growth at a low rate.

The big thing now is to get more people back to work. This will allow the tax base to grow and more money to flow into the government through tax collections. There needs to be an infrastructure jobs program - direct construction and improvement of roads, bridges, schools, water mains, etc. should be implemented in order to put people to work and improve America's crumbling infrastructure. In order to pay for this, there should not be additional borrowing, rather the money should come from letting the Bush tax cuts on the wealthy expire. The 3 percent increase in taxes for those making more than $250,000 won't kill them (my family and I would fit in this group) - in fact this group has done well even in the down economy - and the money would go directly into the jobs program. The tax revenue would increase as people are put to work. It would also help the private sector as it would increase manufacturing and trucking output as suppliers would have to increase production.

Obviously, less money would be required for unemployment and social programs if more people were working. So that would also help to reduce the deficit. If we are sensible in looking at waste in all government agencies - including the nearly sacred defense budget and Medicare and Social Security - we could easily squeeze out at least $50 billion to $100 billion in savings per year. We just need to have the will to do it.

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