Is The Debt Problem Solvable?
The debate on raising the federal debt ceiling is likely to feature substantive discourse mixed with an unwholesome blend of political posturing, self-righteous blather, wishful thinking, and demonstrations of economic illiteracy. Whether an effective remedy to the debt crisis will be enacted remains to be seen.
One of the substantive discourse participants is the Concord Coalition, a non-partisan budget watchdog. The NGO recently discussed two measures that, in their view, could solve the country's debt problem without sacrificing "vital public services or Social Security, Medicare, and Medicaid."
Step 1, "increase taxes on the very wealthy." The Coalition states that if the US returns to "the tax rates we had thirty years ago and the richest 1 percent of Americans would contribute about $300 billion more in taxes this year. That's trillions over the next decade - enough to reduce make a major dent in the federal deficit."
Step 2, "Control the rise in medical costs." The NGO states that the most important means of controlling health care costs is for Medicare and Medicaid, "use their leverage to turn the nation's health-care system from a fee-for-as-many-services-as-possible one into a system that is paid for keeping people healthy and providing high-quality care. Medicare and Medicaid would pay a certain amount per patient, and the accountable-care organization would be responsible for outcomes."
The group notes that although "there are many possible solutions to the enormous fiscal and economic challenges facing the country" such solutions "require political courage, bipartisan cooperation and the active support of voters around the country."
The Concord Coalition's statement on reducing the debt leaves many questions that need to be answered. For example, would raising taxes harm economic growth and innovation?
The group calls for making "big corporations pay their fair share" of taxes but doesn't explain who would ultimately pay those taxes. Since corporate incomes and outflows are ultimately passed through to real people, the question becomes who would pay the corporate taxes. Would they be paid by corporate executives, shareholders, other parties, or a combination thereof? There is no free money.
Of note, the Concord Coalition proposal does not discuss the need for broad-based tax increase on virtually all income earners, a major shortcoming.
Another crucial set of questions that would need to be answered relate to health care. Would using Medicare and Medicaid to lower health care costs lead to lower quality care for seniors and the poor, reduced medical innovation or abuse of government power?
The existence of crucial questions about Concord Coalition's proposal doesn't discredit their ideas, but does point to the need for in-depth analysis. On the other hand, analysis can't be excuse for a lack of action. If substantive, not symbolic, steps aren't taken soon to solve the government's fiscal crisis, consequences will be catastrophic.
Click Concord Coalition Debt Reduction Proposal