America’s Deficit Problem

America’s huge federal deficit and its debt; a subject everybody likes to talk about but nobody likes to do anything about. However, this topic will be at the heart of the conference in Washington, where the new debt commission meets to discuss possible ways to cut down deficits. According to the Wall Street Journal, this conference comes in an election year when all the political leaders will be averse to taking tough decisions.

On Wednesday, the Peter G. Foundation, America’s leading authority that keeps check on nation’s deficit and debt, will hold an all-star conference in Washington. The participant list includes former president Bill Clinton, current budget director Peter Orszag, the chairmen of the new debt commission, Republican Alan Simpson, and Democrat Erskine Bowles and former Federal Reserve chairman, Alan Greenspan. If the earnest discussion among the participants solves the debt problem, it should be fixed by 2:30 P.M, Wednesday. However, earnest talk over mounting debt and deficit is not enough. Political will is also required. But, a mid-term election later this year means that most political will in Washington right now is devoted to prevailing at the election.

So, in such a scenario, the best one can expect in coming months is a moderate start. Both the American government and the American people are addicted to deficit spending. The first step in dealing with this problem would be to acknowledge this fact and both parties should be introspective about what they have done recently to make the problem worse. For the Republicans, it is important to acknowledge their recent mistakes. During George W. Bush’s administration, Republicans made a mistake by launching a giant new entitlement program, a prescription drug benefit for Medicare recipients, without really paying for it. They prosecuted two wars, one against Afghanistan and other against Iraq without asking for tax payments. Democrats should acknowledge that they have committed two big mistakes during the Obama administration. First, they set out to trim billions of dollars in prospective Medicare spending but used the money to expand health care for others rather than to extend the life of Medicare itself.

The second mistake is Obama’s pledge that he will not raise taxes on families who are earning less than $250,000. This means that the huge US deficit can be rectified leaving 95% of the taxpayers out of the tax ambit. As far as changes are concerned, priority should be given to the country’s tax system-that should be changed. The tax foundation reveals that levies paid by the top 1% of taxpayers now exceed those paid by the bottom 95%. Meanwhile, the Tax Policy Institute says that almost half of filers will not pay any taxes for 2009 because of various exclusions and credits.