Medicare for everyone. The Green New Deal. Free tuition.
With each newcomer to the Democratic presidential sweepstakes, a new stream of ambitious social programs is coming to tempt and excite would-be supporters.
The list with & # 39; payment brackets & # 39 ;, to use a bit of Washington jargon grows slower. They will pay this, again? Taxing the rich, taxing the rich – or seeking cover behind a useful piece of progressive dogma: do not worry about the tax consequences, because America's increasing budget deficits and debt levels do not matter that much.
That is a scary thought, and it should make alarm bells for all Americans. Huge debt increases will ultimately damage Washington's ability to maintain its current set of spending programs, let alone add new ones and threaten our standard of living.
A brief history: while the Republicans were once the party of budgetary responsibility, President Ronald Reagan threw that out of the window by embracing huge tax cuts justified by a fiction: the idea that the resulting growth would pay more than for them.
More than a decade later, President Bill Clinton reinstated the budget into a surplus, only to force President George W. Bush to implement his own tax cuts. His vice president, Dick Cheney, once said: "Reagan proved to be short, does not matter."
That attitude, plus the puncture of the dotcom bubble, two wars and a financial crisis, brought us the first $ 1 trillion gap in 2009. But by 2015 President Barack Obama had reduced the deficit to $ 439 billion.
Then came President Trump, with his huge tax cuts and a two-step move to abandon the reluctance to budget for the 2018 budget. The resulting legislation added $ 400 billion to the deficit, according to a Commission estimate for a Responsible Budget, and the result is a deficit for the current fiscal year of nearly $ 900 billion.
At the current rate and pace, the United States is on track to experience the biggest shortcomings in history, with a range of more than $ 2 trillion per year by 2029. These annual deficits are expected to be the total debt of the US on bring the date to almost $ 33 trillion, to the responsible budget committee. That is the double level of today and more than the size of our economy, a record in peacetime.
A concern often raised by deficits is that so much borrowing by the government could push interest rates higher, making it more difficult for companies to borrow and reduce the amount of capital available to the private sector. In the worst case scenario, they fear that the credit markets may be partially or completely shut down, causing the economy to work hard.
Although that is not impossible, I am afraid that all this irresponsible lending amounts to intergenerational theft. At the same time, America is working on two short-term desires: for lower taxes and for robust government programs. Ultimately, the interest on all debts will force the governments of future generations to reverse that tax-imprudent policy to pay for the debauchery of today.
It is as if a couple in their forties decided to borrow money to maintain a lavish lifestyle and then leave the debts of their children behind before they are gone.
But that is not everything. The generally accepted measure for the US national debt does not include obligations for future payments for pensions and health care.
In a perfect world, those programs would work as an insurance; the annual premiums of each generation would pay the support received during the golden years. That principle has been abandoned long ago. Based on the current demographics of the American population, we should put aside $ 49 trillion to make the Medicare and Social Security Trust Funds really solvent.
Meanwhile, progressives claim that certain types of expenditure are actually investments that will bring great benefits in the future. With interest rates that are still close to historic lows, they argue that the return on loans for these investments would significantly outweigh interest costs.
While that is true, it is inevitable to become a political debate if you decide what an investment is and what an expense item is without potential return. Democrats and republicans may quickly agree on investing in the construction of roads and bridges, but what about spending on education? Should this be considered as an investment? What about work force training or research and development? I fear that many spending programs are eventually classified as investments to make the budget deficit appear smaller.
Regardless, taxes should rise, starting with the Trump tax cuts for individuals, which favor the rich. We then have to look at the corporation tax more heavily. Lowering the corporate tax rate to maintain our global competitiveness was logical, but it did not have to go all the way from 35 percent to 21 percent.
Then there are potential new sources of tax revenue. For example, I expressed my support for the abolition of the special treatment of capital gains and dividends. Let us also reform excessively generous inheritance taxes. Although I am most concerned about putting the most burden on the rich, we have to take realistic limits into account to ensure that tax avoidance or even expatriation does not start to rise.
Unfortunately, a thorough analysis of the rights program is essential on the expenditure side. I am not suggesting to remove them, but ideas such as modifying the retirement age in a modest way or scaling benefits based on need should be explored.
Even implementing all these adjustments does not provide prudent space for extensive new social programs. If you were to adopt it, you would have to make even more difficult choices about raising taxes and reducing spending.
When we care about our children and the country we leave, Americans will make these difficult decisions instead of stooping them.
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