Wednesday, May 27, 2009

American Debt and Digging Ourselves a Hole

Complaining about the national debt and unfunded social programs in America is hardly a unique activity, but it's something I'm increasingly worried about. America has been pursuing short-sighted policies for decades that sooner or later we will have to pay for, and I believe we should address this as quickly as possible. True, we are in a recession, and there are a lot of economic arguments for deficit spending in a recession, but the levels we are seeing today are simply terrifying. China has been fueling our public debt for decades and we have become dependent on this. If that changes anytime soon we are in for a world of hurt.

It's not simply the deficit spending that worries me; personal savings have also been rash in America. The Great Recession seems to be changing American savings rates and the credit card reform bill show that things might be changing, but our past actions are symptomatic of a view in our society that could bring about tremendous future pain. Our politicians have not stepped forward to address these issues, trouble looms in the form of unfunded Medicare, Social Security and pensions. Surprisingly, Social Security might be one of the more insignificant issues here.

Furthermore, in addition to the national debt and unfunded social programs, there is a severe lack of investment in American infrastructure. Nations such as China are handily surpassing us. This is not simply a problem for convenience or pride, but how the American economy will do in the future. America seems to have been ignoring this due to a misplaced belief in our own superiority and avoiding looking at reality.

So, how do we deal with all this? I'm not an economist, and cannot give easy answers, but my suggestion is that we pay more now to avoid suffering in the future.

We may need to continue deficit spending during this recession, but there are still plenty of areas that the federal budget could be trimmed. Subsidies to the agricultural industry, the oil industry, the automotive industry could all be cut. We could end the war on drugs. Immigration law could be reformed to allow more working age, tax-paying citizens into the country to boost the economy.

With Social Security and other pension plans, I believe that as Americans are living longer, the retirement age should be slowly raised. With medical care, I believe that universal medical care should be a right. Unfortunately, this would cost the government much more than Medicare costs now. The reforms Obama is proposing will hopefully bring total US medical costs in line with that of other developed nations, but that is assuming the program is executed properly. If it is, total medical costs would be lowered but would still require greater taxes as the cost would be born by the government. I can suggest that more policy makers listen to thinkers such as Michael Pollan and Jane Jacobs, so that we stop subsidising urban sprawl and cheap fast food, as per the above paragraph. A large enough share of our medical costs go to caring for preventable chronic diseases brought about by over-eating and sedentary lifestyles that those changes would make a difference. If those suggestions don't make a big enough impact, well then, we can just hope future medical technology saves us all.

With our infrastructure, we should be spending more money, investing more in better rail networks, broadband, a national power grid and better wireless and cellular coverage. All of that will cost money, and I am fine with seeing taxes raised for it.

In regards to personal behavior, I saw this idea for a progressive consumption tax over at Along those lines I could also support a tax on advertizements, but that would do a lot of harm to the Internet industry I like. Either way, I like playing around with ideas to radically rework our tax structure. It has grown so large starting from scratch might be a good thing.

This has turned into quite a long post, but to close, I can only repeat that we must invest now if we want to avoid greater pain in the future.

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