It's Time for a Solution to this Mess
Jul 28, 2011 |
The president’s address to the nation the other night about the ongoing high-stakes game of chicken known as the debt ceiling negotiations mostly provided evasions, finger pointing and half-truths. During the address, President Obama threatened that the American people are in danger of becoming “collateral damage” if Congressional Republicans don’t accede to his demands and accept his preferred solution to the debt ceiling “crisis” he’s manufactured. He spent more time scaremongering and continuing to lay the blame for our current fiscal woes on the previous administration than he did providing any real solutions. America deserves better leadership than this.
The president showed his hand when he threatened to veto the “Cut, Cap and Balance” bill that passed in the House with bipartisan support. Now, he has all but said that he and his party will not agree to House Speaker John Boehner’s most recent plan, which would match a $1 trillion increase in the debt ceiling with more than $1 trillion in spending cuts (though this plan apparently falls short of its intended reduction targets and has gotten a lot of pushback from conservative Republicans), plus create a congressional commission to identify additional spending cuts.
Instead, the president is backing a plan proposed by Senate Majority Leader Harry Reid that raises the debt ceiling by nearly $3 trillion (enough to postpone the next round of debt ceiling negotiations until after the 2012 elections) and offsets this by spending cuts that Boehner and others have labeled “phony accounting and Washington gimmicks.” One example of this is counting the projected reductions in war expenditures as savings. Reid’s plan refuses to touch the real financial drains that will sink the economy: entitlements such as Social Security and Medicare. His motivation seems entirely political.
And back and forth it goes. Meanwhile we are fast approaching the date when our country runs the risk of defaulting on its obligations for the first time in its history. Further compounding this situation, Moody’s and other rating agencies are signaling they will downgrade the U.S.’s credit rating if viable long-term plans for controlling debt and spending are not realized, even if a deal to temporarily raise the debt ceiling is reached before August 2. The feeling shared by many is that some short-term compromise will be worked out and disaster avoided in the near term, but at the long-term expense of enacting tangible, comprehensive and serious spending reform. Unfortunately, it looks like we’ll be revisiting this issue again all too soon.
For physicians, this is reminiscent of the annual drama surrounding Congress’ decision to deal with scheduled Medicare payment cuts by enacting temporary “doc fixes” instead of showing real leadership and forging a permanent solution to the bad economics represented by the current sustainable growth rate formula (SGR). The ongoing legislative failure to deal with the flawed SGR fosters an uncertain business environment and raises the likelihood of calamity farther down the road.
To an even greater extent than the kabuki theater surrounding the SGR “fixes” each year, the tough choices that need to be made to ensure the long-term financial health of our country cannot be put off indefinitely. Serious deficit reduction will require bold and decisive thinking, leadership and solutions that promise a smarter and fairer fiscal approach. But both sides of the budget issue need to be addressed in the form of reduced expenditures and revenue collection. The flat tax, variations of which have been proposed in the past by Steve Forbes, Mike Huckabee and others, is a logical and pragmatic revenue-generation approach.
Coupled with realistic discretionary and entitlement spending cuts, moving to simplify the tax code by replacing thousands of pages of loopholes, exceptions and exemptions, and passing and enacting a lower fixed-percent flat tax would reduce our debt, stimulate the economy and keep more money in the pockets of the people who earned it.
This is a simple, fair and, dare I say, “progressive” approach. It will provide one marginal rate for personal income, corporate income and earnings from capital gains and investments that only kicks in at a certain income level (say $30,000), coupled with limited standard deductions. It is our best hope for finally getting our fiscal house in order and stopping once and for all the ridiculous political theater in Washington over budgets. Granted, some coveted deductions created by lobbyists would be eliminated, but the total impact on individual taxpayers and the country would be positive.
President Obama campaigned on “Hope and Change.” I agree that we need dramatic change in how we address expenditures and revenue generation to have any hope of returning to economic stability.