When your national debt is $14 trillion dollars, you want to bring it down quickly but safely. You want to avoid unduly burdening your citizenry for past mistakes (*koffkoff*warofchoice*koffkoff*) but you have to balance that with the simple fact that a $14 trilion dollar deficit already burdens your citizenry for those mistakes.
That’s why I endorse Erskine Bowles’ position: All cards are on the table.
Half of our debt is owned by foreign nations. In effect, given that our debt rivals our gross domestic product— roughly 87%– we’re working for the Chinese, British, Japanese and Saudis.
Half of those nations don’t have good redundancy schemes.
As recently as 1990, our public debt was around $4 trillion dollars. Bill Clinton was able to shift the tax burden from the middle class to the rich and made significant strides in cutting the national debt. Our debt-to-GDP ratio has not been this high since just after World War II, which saw an enormous expansion of the economy as the wars wound down, and the GI Bill was enacted, which encouraged home ownership and college education, among other benefits for the returning veteran.
Roosevelt raised taxes. Rather, he expanded the tax base to include all income, not just wage income, proposed taxes on corporate earnings, and instituted the payroll tax that funded Social Security. And he raised the top marginal tax rate to 91% (!!!). He squarely put the burden of economic recovery on the shoulders of those who both brought the nation to its knees in the Great Depression as well as those who benefited from the increase in economic activity most.
In fact, consistently, with the exception of Eisenhower (who these days would probably be a Democrat), every Republican president since World War II has raised the percentage of debt to GDP, and every Democrat (Obama is an incomplete grade) has lowered it.
Democrats are rightly called the party of tax and spend. Republicans just spend. Democrats can afford what they buy, Republicans put it on a massive credit card and the bill is now coming due.
This is why Obama had to create a debt commission, to correct the mistakes of yet another Bush Presidency. And the solutions are not pretty. There’s only so much personal income to be had from the middle class, which has seen its wages stagnate since 1980 and after adjusting for inflation, decline. Yes, more families now have two incomes so there’s more income coming in the door, but there’s also more debt going out the door: payments for a second car, for example, or disproportionate taxes on that second income (the “marriage penalty”), child care payments, increased spending on clothes and food, and so on.
The gap in income between the rich and the poor does give some material for increases in income taxes, its true, but it’s not as much as many would think, and certainly not fourteen trillion dollars worth. It may be time for more effective revenue enhancements, to use a cliche: a national sales tax, for example, that exempts staples and necessities, scaled so that the more expensive an item in a class of goods is, the more taxes will be thrown off.
If you buy a Hyundai, in other words, you won’t pay as much as a Camry, and nowhere near what a Lexus buyer would pay.
In addition to raising taxes on the wealthier, I’d like to see some tax cuts that make sense. For one thing, cut taxes on bank accounts, savings accounts, to encourage people to put their money into the bank.
Which would encourage lending by the banks. Which would encourage economic activity. Which would generate more jobs and income. Which would raise the GDP. Which would make us a healthier nation once again.
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