Implications of National Debt

Robert Samuelson may be considered a more conservative economist, but I do read his columns with interest and usually find them quite convincing. In his latest column, he discusses the implications of the debt of many major nations, e.g., Spain, Great Britain, Japan, and also, the United States. His observations are generally based on a IMF report that includes reasonably convincing data on what could be overwhelming national debt by 2014 (cf. below).

His scenario about the implications of such debt is scary and would make anyone pause to consider what should be done.

From my point of view, I would suggest:

1. The President and his administration (including Congress) should start voicing the need for a national response that would involve EVERYONE for a long time. Increased taxation and reduction of benefits are inevitable and only a sense of the common good will enable the politicians to do what will be required.

2. How can costs be reduced?

a. Health care: we have to get a universal card system as fast as possible and, with this national system, we will have to ration care comparable to what other nations do. In short, we cannot afford everything to all on demand. Whatever care will be provided within the provisions of a national system, I see no way to stop those who can afford more insurance to access more health care options. There are all sort of implications to this type of rationing, e.g., some medical research designed to bring advanced types of biotech treatment will have to be deferred/short-changed

b. Department of Defense: our nation has been expanding its military capacity to the point of the absurd. We have made our "allies" dependent on our use of OUR resources to address their needs. It is not fair. In addition, our empire building days have to end. We cannot save the world. We should be on the path to get the United Nations to expand its charter to include a military that would address issues of concern, e.g., genocide.

c. Benefits: Social Security should be adjusted regularly to the constant advancement of longevity. To extend benefits longer and longer without any adjustment may not be possible. Moreover, there has to be a change in the ceiling of pay roll tax for Social Security. The tax should be on total income AND the payouts should be adjusted to income, i.e., those at the bottom will get proportionally more in their benefits than those who have higher income and for those beyond a certain amount, e.g., $500 K, would receive NOTHING!

d. Tax Laws: Current incentives that reward those with more income should be modified, if not eliminated. One such tax law is the mortgage interest deductions. I would recommend the elimination of this deduction. It would add needed tax revenue and support initiatives designed to promote houses that are more reasonable in terms of their carbon print.

I believe that these changes would address our national debt.

General Government Debt to GDP

• COUNTRY
• BRAZIL
• CANADA
• CHINA
• FRANCE
• GERMANY
• INDIA
• ITALY
• JAPAN
• SOUTH KOREA
• MEXICO
• UNITED KINGDOM
• UNITED STATES

• 2007
• 67%
• 64%
• 20%
• 64%
• 63%
• 81%
• 104%
• 188%
• 30%
• 38%
• 44%
• 62%

• 2014
• 59%
• 69%
• 20%
• 96%
• 89%
• 79%
• 129%
• 246%
• 35%
• 44%
• 98%
• 108%