The U.S. Will Become A Third-World Nation Unless We Fix Our Financial Mess

Monday, August 26, 2013 10:22
edit
The U.S. Will Become A Third-World Nation Unless We Fix Our Financial Mess

Tags: economy

I don’t think anyone can deny that the U.S. government needs to fix its national spending and taxation policies, and do it quickly. This nation, in my opinion, is heading toward third-world status if its financial situation isn’t corrected. We’ve been the world’s greatest power, militarily as well as economically, for a long time. But remember, so were Rome, the Mongols, Great Britain and Portugal, and those once-mighty nations all fell from greatness.

This Website Is For Financial Professionals Only



The problem today, of course, is how to fix things. Republicans and Democrats have different ideas about the scope of the overall problem as well as methods for correction.

 
The debate has become more heated since Erskine Bowles and Alan Simpson, co-chairs of President Obama’s Deficit Commission, released a “Chairmen’s Mark,” a broad plan to reduce the federal deficit by cutting spending and raising taxes.
 
I will not speak from any particular political viewpoint. I will speak as an 82-year-old to whom Social Security benefit payments are essential for survival. At my age, I am in what is considered a “protected” age category. So, too, are those SS recipients in their 70s.
 
This brings up the question, what about everybody else?
 
I’ll get to that in a moment, but first let’s take a look at what is being said in the debate.
 
Strengthen Social Security (SSS), an organization based in Washington, D.C., says the Bowles-Simpson plan “would cut Social Security benefits for today’s and tomorrow’s beneficiaries. Of even greater concern, it would end Social Security as we know it.
 
“The Bowles-Simpson proposal cuts Social Security’s retirement, survivors, and disability benefits by between 19% and 42% for young people entering the workforce today.” SSS adds that the plan would “reduce the annual Cost of Living Adjustment (COLA) for current and future Social Security beneficiaries . . . with every passing year. This would prevent benefits from keeping up with increases in the cost of living over time. Under these plans, retirees claiming benefits at 65 would see their benefits decline by 3.7% at age 75, by 6.5% at age 85, and 9.2% at age 95.”
 
The plan also “would raise the full retirement age to 69, and the earliest eligibility age to 64.. . . Raising the full retirement age by two full years amounts to a 13% benefit cut, on top of the 13% cut already made when the retirement age was increased from 65 to 67. The cuts are hardest for workers in physically demanding jobs, poor health, or who are otherwise unable to continue to work. . . . More than half of all workers with an annual income of about $11,000 would see their benefits cut by about 16% under the Bowles-Simpson proposal.”
 
Simpson and Bowles said the purpose of their latest proposal is not to replace the plan that they produced as co-chairs of the President’s National Commission on Fiscal Responsibility and Reform, but to illustrate a comprehensive, bipartisan approach that leverages areas where common ground can be found.
 
Simpson and Bowles say in a preamble to the new report:
 
“The plan we have put forward here is not our ideal plan, it is not the perfect plan, and it is certainly not the only plan. It is an effort to show both sides that a deal is possible; a deal where neither side compromises their principles but instead relies on principled compromise. Such a deal would invigorate our economy and demonstrate to the public that Washington can solve problems, and leave a better future for our grandchildren.”
 
They describe the plan as a “balanced, comprehensive approach that addresses all parts of the budget.” In addition to the $2.7 trillion in deficit reduction already enacted, not including sequestration, the new Simpson-Bowles plan would produce a total of $5.2 trillion in deficit reduction, enough to bring the debt down to about 69% of GDP in 2023 and “putting it on a clear downward path as a share of the economy.”
 
The plan, and its various options, contains too many suggestions to discuss here. Please allow me to make some generalizations:
 
First, I think it is absolutely necessary for Congress to agree soon on a solution, and for President Obama to sign any resulting legislation, that will put this nation back on firm financial footing. This means we should cut spending for foreign aid, defense, entitlement programs, including Medicare and Social Security, while at the same time cut taxes for middle-class Americans. Otherwise, we may become a nation of the 1 percent and 99 percent poor.
 
I think the tax rate for large corporations should be increased, that the 1 percent should be taxed more and that federal taxation should be eliminated for the poorest 10 percent of legal Americans. I think it also is imperative that a federally sponsored program should be initiated to promote retirement savings by all Americans.
 
Saving, saving, saving should be imprinted in the minds of our nation’s youth. I also think money should be found for improving our educational system nationwide and that money also should be found to improve our nation’s deteriorating transportation networks. These latter two ideas would boost America’s capability to compete with emerging super-nations, such as China, India and Brazil, in productivity, and would stimulate the economy (and boost tax revenues) by creating new jobs.
 
I’m aware that my suggestions may be provocative and difficult to implement, especially given the tremendously stupid gridlock that exists in Washington.
 
Something must be done. Even at age 82, I’m playing a small role: I pay taxes on the money I receive for writing articles and editing.
 
Do I think it’s unfair to tax the rich and not the poor? Yes, but something has to be done. The rich can afford it, the poor cannot. Is it unfair to start locking the young out of the full Social Security benefits that I get? Yes, but changes must be made. Maybe it’s time to phase out Social Security and Medicare and come up with new programs to replace them.
 
I do not, however, think that Medicaid, should be eliminated. The poor will exist always, and always will need help. Try to remember, there but for the grace of God go I.
 
Now I will reveal my politics: A former registered Independent, I am a long-time Democrat and consider myself to be extremely liberal on social and political issues. I’m also a realist.

 

Comments (4)

...
ronsurz
Thanks for sounding the alarm Bob. It's conceivable that our entire economic system could collapse, beginning with the debasement of the U.S dollar. Social uprisings could follow, the beginning of the end.

If you'd prefer to laugh rather than cry, as do I, see the Saturday Night Live skit about our debt to China at http://www.hulu.com/watch/110317
ronsurz , August 26, 2013
...
stvnrsmth
No one can deny that the U.S. government needs to fix its national spending and taxation policies?

Actually, there is an increasingly respected economic school of thought, called Modern Money Theory, that maintains we don't spend nearly enough. Check it out. http://neweconomicperspectives.org/p/about.html
stvnrsmth , September 10, 2013
...
Ruth
I am truly beginning to believe that the current administration is orchestrating the collapse of the US Economy. I think they want the US to be a Third World Economy. They are following the blueprint established by Profs Frances Fox Piven and Richard Cloward to a tee. Just look at the way they are enrolling people at an alarming rate in the Food stamp Program.
Ruth , September 10, 2013
...
ronsurz
RE: Modern Money Theory

Trying to fix problems caused by excess consumption with more spending is like telling a fat guy that the way to lose weight is to eat more donuts.

Please see Fred Thompson 2008 video at http://www.youtube.com/watch?v=RKc4XFK0iVY

ronsurz , September 10, 2013

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.

busy