Debt is a pretty scary thing. People lose their homes over it, families can descend into dysfunction and chaos due to it, and in older times people were imprisoned or exiled to faraway places, like our own country, due to its fake, glittery allure.
During the past few years both individuals and our federal government have fallen into debt’s clutches. Fortunately, it is clear that the biggest potential hazard of our federal government’s taking on such over-sized debt - inflation and the significant decline of the dollar - have not yet occurred. Hence, the critiques by conservatives and members of “Fox Nation” have yet to be sustained. Their broader point though, that taxes will eventually need to be raised to pay for a larger government role, has so far only even been proposed (and temporarily rejected) for richer Americans. Yet, the questionable morality and long term risks of living with such high levels of debt is frightening.
We are growing incredibly vulnerable to terrible economic risk due to the size of our national debt. Future inflation and the crowding out of money available for companies to grow is extremely real and frightening, but not as frightening as our vulnerability to the type of currency manipulation and economic decline that befell overextended Asia in the late 1990s.
Thus, government must be cut down in size, particularly entitlement programs like Social Security, Medicare and Medicaid. Medicare’s deductibles and co-pays must be increased so that patients have to pay some share of their bills in order to drive down unnecessary medical usage. Medical spending on specialty physicians, especially non-vital diagnostic procedures need to be paired down. Patients must also share the cost of end of life medical treatment with taxpayers. The price government has negotiated to pay for pharmaceutical drugs must be drastically reduced. Military spending (nearly 50% of all the military spending in the world is spent by U.S. taxpayers) must be significantly reduced. Agricultural and ethanol gas additive supports; scientific research funding and tax credits for biotechnology research (whose products help only a very few people at an extremely high cost and which employ relatively few people compared to high-tech manufacturing); highway funding; tax credits and subsidies for the oil and gas industry, and favorable tax treatment for companies who earn a large percentage of their income abroad or export jobs overseas, all need to be cut. Overly generous pensions, health-care benefits and significant amount of paid nonworking days given to many government workers need to be cut back; this should include U.S post office employees and air traffic controllers, which should be sold to private companies. Police, whose overtime and paid detail reimbursement are overly bloated, expensive, and a rip-off to the taxpayer must be cut back. The seemingly forever expansion of unemployment benefits (instead of wage support to assist employers to keep workers at their jobs during economic downturns), the number of people working off the books and thus avoiding paying their fair share of taxes, as well workers classified as independent contractors, instead of employees, so that employers can avoid paying taxes on those workers and companies classifying certain employees as “management” to avoid paying overtime must be cracked down upon.
If all these special interest protected recipients of overly favorable governmental treatment cannot be reduced in scope, than the federal government should cut all discretionary spending- including military spending, by 2% in 2012 and another 2% in 2013.
Most importantly however, the political right’s economic theory behind protecting wealthy people’s money- that large concentrations of capital are needed for investment to create jobs- has proven to be completely false. American corporations are now sitting on piles of cash, derived from both the productivity gains of US workers, laying off workers, and the companies own success in leveraging the new opportunities to sell products in developing countries abroad. What clearer empirical evidence could we ask for that demand basically drives economic growth, not supply side, trickledown economics? Only when companies and banks see demand for goods and services they will invest money in new facilities and workers.
How should we increase demand? We need more jobs for more people at better wages. Just like we did during the economically successful Clinton years, we should increase the minimum wage to give more people more money to spend to increase demand. We should also set up a new standard for salaries- a living wage- for all people who have worked for the same employer at any job for more than three years, something like $12 per hour- not the $8 per hour that is the Massachusetts minimum wage- and we should make it discriminatory to fire anyone exclusively over the increase from a regular to living wage.
To create more jobs in the moribund construction area we should temporarily suspend for 2-3 years Americans with Disabilities Act (ADA) requirements for elevators in two or three story buildings of less than 50,000 square feet. This will incentivize some people to build now and put the construction industry and related industry workers back to work.
Building a clean energy infrastructure, especially as it effects our ability to be more energy independent, involves projects from weatherization programs to high speed rail, electric cars, clean coal, nuclear energy (in spite of what occurred on a fault line in Japan), solar, wind turbine support, computer analytics to make everything from the electric grid to traffic light integration more efficient, electric and lithium batteries and next generation research and development of new renewable energy sources must all receive financial commitment from the taxpayer. This will lead to more jobs, a cleaner environment and greater energy independence and national security, as we won’t have to fight wars and commit troops to enhance our strategic interest to keep oil flowing.
As shown in China and Germany, government’s active role in the economy can enhance prosperity for the nation. Directed government spending and incentives create demand in ways low taxes, capital accumulation and the free market alone do not. China invested $120 billion into renewable energy last year while the U.S. invested just $20 billion. China also passed the U.S. as the top market for attracting private capital for renewable energy.
Lastly, to break our predisposition for consumption over investment we will eventually need to adopt a value added tax on consumer goods and tax gasoline and oil based products more. This will enhance over international strategic position as well as diminish our need for foreign oil. We can then stop the sending of so much of our national wealth abroad to buy cheap imported goods, end our export overseas of production jobs to make the cheap consumable goods we purchase, and make us less reliant on the foreign countries who buy and invest in our U.S Treasury bonds with the trade deficit money we keep shipping to them to buy so many consumer items. Less oil and gas consumption and less materialism is our key to a bright future.
This is Randy Feldman on True Talk 830 AM’s Midday Report.
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