My Turn: Taking a look at our debt crisis
March 6, 2012
TAHOE/TRUCKEE and#8212; The other day a young acquaintance asked me what is the big deal about the U. S. debt crisis. That question got me to thinking about what the concrete effects of this issue on our country might be.
I recently saw on television my beloved Athens burning after a demonstration by tens of thousands of its peaceful citizens and a few hundred violent anarchists.
Is this what the future holds for America? Is this a debt trap we have gotten ourselves into?
Itand#8217;s apparent that the United States, like Greece, is going to have to drastically reduce its spending and borrowing. The administrationand#8217;s recent budget proposal actually increases spending and the national debt rather than any reduction.
Continued deficit spending will increase our borrowing costs as interest payments consume an ever larger share of our budget. Additional credit rating downgrades will lead to higher interest rates on our borrowing, again increasing borrowing costs.
This increasing of debt service costs will require reductions in spending in other areas and#8212; defense, Social Security, Medicare, Medicaid and other government services and#8212; and increases in taxes.
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Increases in debt, debt service and taxes will reduce the funds available to invest in private business growth. Economic growth will slow and gross domestic product will shrink along with tax revenue.
Slowing business growth will lead to higher unemployment again reducing taxes and increasing spending to support the social safety net and lowering our standard of living.
Which means we will have to borrow still more. Do you see where this is going?
Everyone talks about pushing debt onto our children and grandchildren. This spending and debt is their problem, not ours. Or we just owe it to ourselves so no problem. But itand#8217;s far more serious than that. If we continue as we are, there wonand#8217;t be an economy for our children and grandchildren.
We will have created two spirals: a debt spiral and spiraling economic decline.
We must demand that our legislators, federal and state, drastically reduce spending to avoid the collapse of our economy and a collapse of our standard of living along with it.
But they could eliminate whole departments and their spending and#8212; Education, Commerce, Labor, Agriculture, to name a few and#8212; and still not cut enough.
Entitlements are the big issues: Social Security, Medicare and Medicaid must be reformed. How long have we been hearing about the absolute necessity of such reforms? Almost all of my adult life.
Well we have now run out of time.
Perhaps we will have to raise the retirement and Medicare eligibility ages. Turn Medicare into an insurance plan. Turn Medicaid back over to the states. Repeal Obamacare.
But we have to get started.
Tell your representative and senators to start the hard work to effect reforms. Now, before itand#8217;s too late.
Paul Duggan is a retired executive living in Truckee.