Archive for December 27th, 2012

In their recent op-ed for the “Campaign to Fix the Debt,” New Hampshire State Senator Lou D’Allesandro and former Pennsylvania Governor Ed Rendell used several paragraphs to explain the danger that the country could go over the “fiscal cliff,” which they describe as “a series of across-the-board spending cuts and tax increases that will hurt everyone.”

That these measures, intended to reduce the federal government’s fiscal deficit, have aroused dread even among leaders of “Fix the Debt,” should be proof that the “debt’ is not the biggest problem we face. In the short run, the top economic problem the country faces is under-employment and stagnant wages for most workers.

The major cause of the current federal deficit is the economic collapse that began in 2008. When the economy melted down, the taxable income of workers dropped. Moreover, un- and under-employed workers were more likely to receive federal payments such as unemployment insurance, Medicaid, and food stamps.

The other significant causes of the deficit are the tax cuts pushed by President George W. Bush and extended/expanded by President Obama, and rapid expansion of military spending, including (but not limited to) the invasions/occupations of Iraq and Afghanistan.

The cost of Social Security has nothing to do with the current deficit. If the population and economy grow at normal rates, the future workforce will deposit enough into the system to fund the retirement of those who are working now, especially if Congress raises the payroll tax cap and permits millions of undocumented immigrant workers to enter the formal economy.

Long-term, the cost of Medicare and Medicaid could pose a significant burden on the economy. But this has everything to do with the larger problem of rising health care costs and nothing to do with the fact that these are “entitlement” programs.

If the nation insists on cutting the deficit, we should return our attention to its causes: tax rates, excessive military spending, and the recession itself. If we fix the economy, the debt will take care of itself.

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