Washington remains in gridlock on raising the debt limit and reducing our country’s huge deficit. If nothing is done by Aug. 2, the impact could be catastrophic. We could see a dramatic collapse in American stock values, and higher interest rates imposed by creditors, especially from abroad. This would bring about inflation. Coupled with a recession, this would have a negative impact on most Americans.
Republicans want approval on raising the debt limit to be tied to real cuts in the budget. Democrats want to see less cutting, and some tax increases. But both sides know that action has to be taken.
Why can’t Congress reach an agreement on raising the debt limit, when everyone wants to see it happen, including the politicians? Both Democrats and Republican politicians don’t have the courage to be first in making concessions on a bipartisan agreement because the outcome might affect their own bids in the forthcoming election year.
The nation’s well-being should come first, rather than thinking about protecting their re-election chances next year. Even more important, nothing is being said by our government about solutions on spending cuts or job growth at this time. We urgently must address those issues.
In the business world, when a company’s expenses are higher than incoming revenues, the plan of action would be to reduce overhead by cutting spending, personnel, services and purchased materials; otherwise, the company could go bankrupt or even out of business.
In like manner, when the government has too much debt, it must substantially reduce its spending and unnecessary entitlement programs, military expenses and downsize services and personnel. Now the deficit is more than $14.3 trillion. The government must phase in changes over several years, probably starting after next year’s elections, with Social Security, Medicare and Medicaid programs. The tax structure must be revised to reduce the deficit, including but not limited to items like defined benefit public pension plans, to bring them into line with private sector pensions. Many people ask why some police and fire department personnel, teachers, bureaucrats and other public employees get retirement pensions up to 85 percent of their pay, plus Social Security payments, when people who work for privately-owned businesses are lucky to get 5 to 10 percent in retirement benefits.
To jump start job creation, governmental regulations should be revised to induce big and small businesses to invest in new equipment or to retrofit older equipment in order to be more competitive in the market place. The results mean more jobs. Business tax reductions should be offered to employers who create new jobs. Yet businesses must realize that tax loopholes and deductions, both overseas and domestically, will have to be eliminated to help pay off the huge deficit.
We need to delay government spending on infrastructure projects like roads, railroad facilities and bridges, until our deficit is substantially reduced. Healthcare costs should be monitored closely to eliminate exorbitant charges from suppliers and medical centers receiving government payments for their services. The new healthcare reform law will also have to be changed from its present form to reduce costs.
Congress needs to permit a higher debt ceiling to protect the government’s credit rating from going into default. But we also need to cut the deficit by reducing government spending. If a bipartisan agreement can be reached to raise the debt ceiling, in exchange for cuts in spending, and reductions in entitlement programs, it could be a win-win solution toward eliminating most of the future deficit.
Right now we need to rein in spending. We also need to pay down our debt. Yes, to do this, the tax structure will have to be changed. Loopholes need to be eliminated, and we should give up many tax incentives, that reduce our federal tax income, before we even think about raising tax rates, during a recession. In fact, federal, state and local taxes should not go up. At the local level, we should not see property tax increases. We need to help protect people’s homes in today’s tough economic times.
We face difficult times ahead. Our nation’s future is at stake. Politicians must put aside personal ambitions, by doing the right thing now for our country. Meeting the Aug. 2 deadline is one way to show political courage.
— Bernard Featherman is a business columnist for the Journal Tribune and a former president of the Biddeford-Saco Chamber of Commerce.
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