In his fair well address, President Bill Clinton left the American people a blueprint for the 21st century. "Through our last four budgets we've turned record deficits to record surpluses, and we've been able to pay down $600 billion of our national debt--on track to be debt-free by the end of the decade for the first time since 1835. Staying on that course will bring lower interest rates, greater prosperity, and the opportunity to meet our big challenges. If we choose wisely, we can pay down the debt, deal with the retirement of the baby boomers, invest more in our future, and provide tax relief."
Unfortunately this blueprint was not the option pursued by the succeeding administration. Instead of calling for entitlement reform to preempt the generational crisis about to hit the social security and medicare, President George W Bush ignored Clinton's warning. In one of his first acts as president, George W Bush passed a series of irresponsible and excessive tax cuts for middle class earners and high income earners, the latter of which enjoyed a large majority of these tax benefits. Instead of paying for these tax cuts with spending cuts, the Bush Administration massively increased government spending for the new Homeland Security Department, a revenge turned occupation in Iraq, and an expansion of entitlement spending under Medicare D.
None of this contributed to significant growth in employment or the economy. Instead the nation plunged into a recession followed by a chilling debt crisis that has frozen the gears of political action within our government. Now we are approaching a breaking point of this political crisis culminating in the infamous Fiscal Cliff. Members of the federal government will be forced to decide between two obligations, political ideology and the American people. Pundits will exchange irrelevant banner over "if" the fiscal cliff will affect the American people. In reality, Americans will be forced to make sacrifices either way in order to pay for a decade of economic fecklessness.
What must be done first and foremost, is the elimination of the Bush Tax cuts. President Obama's deficit reduction plan calls for Bush era tax cuts to be eliminated for earners making $250,000 or more. This means that the wealthy will still have $250,000 in tax free income. The rest of their income will be taxed by merely 39% as opposed to 35%. Conservative pundits accuse such a proposal as a guaranteed blow to the US economy since it would absorb money from the wealthy that would be used to invest in job creation. But as I see it, if wealthy individuals have enough money to throw several billion dollars into a failed presidential campaign without being even marginally affected, they have enough money to pay an extra 4% on income taxes.
Tax cuts for the purpose of job creation must be applied as an reward for companies who actually hire in America, not a guaranteed "incentive" for every wealthy individual. What causes job loss in America isn't tax burden but labor costs and tax cuts for the wealthy will not change this trend. Most likely, this extra money acquired from tax cuts will be invested in a new Hummer for junior, a week in Geneva, Switzerland, or a yacht to sail on Lake Michigan. Sweat shops in Vietnam will continue humming, while unemployed Americans continue to search for work in vain.
Estate and Gift Taxes must also return to the 1990s rates. There is no reason why wealthy families should have the right to hoard millions of untaxed dollars while the nation is experiencing a deficit crisis. Such untaxed wealth provides no benefit to economic growth. Cuts to the Estate Tax are the product of an ideological dogma of greed and selfishness. In a time of economic necessity, it is imperative that wealthy Americans pay their fair share, especially in death at which point the have no practical use for such money.
If Congress wants to design a fair tax code, then the tax in most need of reform is the Capital Gains tax which is currently set at 15%. This is far lower than the average income tax rate. Capital Gains is where the ultra rich acquire the majority of their wealth. This is why Mitt Romney and Warren Buffet pay a lower rate than middle class families do. The low Capital Gains marginal tax rate is the biggest tax exemption in the American tax code, and if Republicans are serious about removing tax loopholes, they should start by raising the Capital Gains tax to 20%.
However, while tax increases are imperative, they cannot be the exclusive solution. Pragmatic reforms must be made to Medicare, Social Security, and the Military to decrease government spending. Our military budget is due for a cut, perhaps even a buzzed trim. President Obama's "horses and bayonets" line in the 3rd debate captured the reality of military spending. In the 21st century, threats to America are found in small caves in Pakistan and in cyberspace, not in large war rooms of evil empires or in the palace of some well armed autocratic lunatic.
21st century Military strategy should center around special ops units, cyber security, and drones as opposed to massive military build ups. The beauty of such a strategy is that special ops and cyber security are cheaper, smaller, easier to maintain, and more efficient alternatives. We need subtle warfare, not a broadway musical act with huge cannons, mushroom clouds, and Mr. T holding an AK 47. Furthermore, one valuable benefit from the Iraq War was the creation of counterterrorism units that were designed to deal with asymmetrical threats. Why not use the existing structure created for post-Iraq war combat? Now that military operations have ended in Iraq and are set to end in Afghanistan, its time to start severely depleting the military budget. It's time now to the starve the beast.
As for entitlements, I believe President Obama should be willing to compromise on pragmatic cuts and reforms but to proceed with caution. Social Security benefits should not be cut, but the age limits must be raised to reflect the current cost of living and life expectancy. Millions of American seniors as well as the far left progressive base will be infuriated with such a compromised decision. But as Americans we must all be willing to sacrifice a few social benefits for the economical and social health of the nation. In order to ensure that these programs are available to future generations, an overhaul is required to adapt America's entitlement system to the 21st century.
However, while entitlements are in need of reform, cuts to the entitlement structure should not be pursued in a time of economic recovery. That is why President Clinton proposed that they be dealt with sooner rather than later as he left office during the end of a period of prosperity and economic growth. In order to have a strong economic recovery, America needs a healthy Middle Class, and entitlements are the foundation of what makes that possible. In my assessment, the economic recovery will be harmed far more by cuts to entitlements to middle class consumers and small business owners than a modest tax increase for the top 2% of earners in the US. While the goal of this compromise is deficit reduction, Congress must not forget the more important task of economic recovery. Furthermore, I believe this election illustrated that most Americans prefer the Democratic approach to deficit reduction.
Republicans argue that there was no mandate for tax increases following the results of the 2012 election. Such is the condition of living behind the iron curtain of ideology blinded from the realm of reality. House Speaker John Boehner and the Tea Party movement established that the 2012 election would be a mandate on their ideals vs. President Obama's as far back as 2010. The debt crisis during the pst 2 years was avoidable, and it was artificially crafted by an ideological agenda to spark discontent over the fiscal health of the nation. Congressional gridlock illustrated economic and political weakness in the US to global markets. This perception ultimately lead to our credit downgrade by Standard and Poor's in 2011, not the size of the deficit itself.
From my observation, these past two years of stalemate and bickering over the federal budget deficit were fueled by political motives to ensure a one term Obama presidency. These efforts failed miserably this past November. While Democrats did not win back the House, they retained the Senate, gained in the House, and President Obama was reelected. Despite the "Taxed Enough Already" mantra loudly pontificated by the far right, most Americans recognized that over the past decade, we've had the lowest tax rates since the 1950s, and yet we are in a recession. In the end, sacking public broadcasting, women's health programs, unemployment benefits and placing the bulk of the burden of deficit reduction on entitlements so that the wealthy can continue to enjoy prosperity era tax cuts is not the solution Americans endorsed. Now that the American people have spoken, its time to act.
As it now stands, President Obama and the Democrats have already won. A year ago, the primary argument was whether tax reform would be considered in the deficit reduction plan at all. Today the argument centers around how revenues will be included, by raising marginal rates or by closing exemptions and loopholes, the latter approach preferred by Republicans. Still despite Republican concessions, the president must not compromise on eliminating Bush tax cuts for the top 2% of earners, even if it means going over the fiscal cliff. Limiting tax exemptions and loopholes alone will not garner enough revenue to meet the president's goal. Furthermore, such a method would put more tax burden on the middle class by eliminating provisions such as the mortgage interest exemption.
Therefore, if another recession is what is needed to tear down the walls of political obstruction in Congress, then for the good of the American people, it must be done. Such a hard decision would show true leadership, which America has witnessed during several previous presidential adminstrations Lincoln, Roosevelt, Johnson, and Reagan to name a few. I am confident the president possesses such leadership capabilities. Nonetheless, I hope that fate does not lead our nation to such an end result.
No comments:
Post a Comment