On the heels of an 11th-hour deal late Friday night that averted a government shutdown, the real debate has only now begun. Debate over the debt ceiling will be heating up; if we stay on the current course, the U.S. will reach the maximum borrowing limit of $14.31 trillion by mid-May. Additionally, the fiscal budget for 2011-2012 will be taking place. The reality of the situation is that the only remedy would be major cuts, coupled with tax increases. However, many on the right say we only have a spending problem and not a revenue problem, and many on the left refuse to cut spending in favor of only raising taxes.
President Barack Obama finally embraced main suggestions from his National Commission on Fiscal Responsibility and Reform, headed by former Republican Sen. Alan Simpson and Erskine Bowles, a former Chief of Staff to former President Bill Clinton. Obama needs to embrace the Bowles and Simpson plan.
The plan achieves fiscal sustainability and an almost even split of tax increases and program cuts. In regards to taxes, the plan would remove many of the tax deductions while lowering the overall tax rate among all Americans. Another novel idea I believe in is a reform of the tax code where the billionaires are not grouped with those making $250,000. Additionally, the plan will require cuts in the non-discretionary budget from the U.S. Department of Agriculture to the Department of Energy. Obama plans a $400-billion cut over the next 12 years as well as a pronounced decrease in defense spending. The goal is to reduce the national debt by $4 trillion over the next 12 years.
The Republicans are banking on Wisconsin Rep. Paul Ryan and his “Path to Prosperity,” which would eviscerate branches of the government that the majority of Americans approve of, such as Education and Labor. The cuts from the non-discretionary budget here would be well over $1.6 trillion, despite the fact that these programs are the most critical to most Americans. The “Path to Prosperity” also keeps the defense budget untouched despite the foreseeable mitigations in both the Iraq and Afghanistan wars. Additionally, Paul’s reform would raise taxes for 95 percent of Americans.
It appears Obama has the people on his side, as a Gallup poll released today showed that 60 percent of Americans favor a tax increase on the highest income bracket and are apprehensive about slashing domestic programs with a plurality against cutting them.
With regards to Social Security, the best plan would be to raise the age gradually from 67 to 69 and demand that the highest income bracket contribute more. The Republicans’ path for prosperity ignores any means of rectifying the impeding long-term solvency of the program. Obama is correct when it comes to the plan using Medicare’s large size as leverage against higher prescription prices.
Regarding the debt ceiling, the limit was more than doubled from below $6 trillion in 2001 to over $12 trillion by the end of 2008. Since the financial downturn, the ceiling is now $14 trillion. Finally, there seems to be some real apprehension about raising the limit. But those on the right have the wrong idea; they believe simply not raising the limit would fail to bring about any repercussions. The fact is the limit needs to be raised but large cuts must also be made to prevent an increase of the limit further down the road. A fiscally savvy budget for the 2011-2012 fiscal year will be the first step to sustainability.
Obama’s plan will anger many on the left and even more on the right, but it is the only viable way to set the country on the correct path. Hopefully, those in Congress will be shrewd enough to do what is best for us all and not make a budget built on social issues and derision.
Chad Mohammed is a second-year chemical engineering major. His columns appear on Thursdays.
