In the first half of this two-part article, I explained how the United States got into this economic mess we are stuck in. In this second half, I will offer suggestions as to how we should fix the economy. First off, spending cuts alone won’t solve our problems because the government will never make enough cuts. The American public has become too dependent on government spending for that to be a viable solution. Program cuts, debt restructuring, and tax adjustments are all needed to drag us out of this recession.
Raising taxes is the first step toward solving the problem. Yes, it’s true, I believe a small increase in capital gains tax and slight increases in income taxes for anybody making about $120,000 per year will be necessary for a time frame of say four years, to help sustain the government as it cuts down on programs and pays down the debt. While on the issue of taxes, I would propose taxing businesses less and increasing the minimum wage so that consumers will have more in their pockets to spend; consumer spending is better than government spending. Poor workers would then be spending money at businesses of their choosing rather than using food stamps provided by the government (read: your taxes). Another way low income citizens could receive assistance is through a negative income tax, which would allow for more agencies than programs like food stamps. However, fraud is likely to run rampant if a negative income tax is implemented across the board, indicating that it would perhaps be better to start with the first option and then try to implement a fraud-resistant negative income tax later on down the road.
Next on the agenda are the subjects of debt and default. The revenues garnered from increased taxes and freed up by cutting programs should be used first and foremost to pay down the interest on the public debt. Last year, Washington owed $359.8 billion in interest on the public debt. The U.S. is at $168.4 billion so far for the 2013 fiscal year. The government also needs to regulate banks and credit card companies more heavily, as they are the creators of debt. The banks, maybe with some government coercion, should restrict access to loans; they enable people to live beyond their means before eventually defaulting. And defaulting doesn’t help anybody. Furthermore, the federal government should not subsidize companies and industries that can’t survive on their own. Let them die. “Too big to fail,” is a dangerous phrase. It creates a moral hazard because the banks and companies will be more likely to give out riskier loans and undertake riskier business ventures when they can expect to be bailed out. Besides, hundreds of companies die in Silicon Valley for every one that survives, but no one will argue that Silicon Valley is a failure. Bailouts and high-risk loans need to go, and the national debt needs to be tackled.
The Nanny State must also be dismantled if we are to get back to our former glory. This point is critical. Program cuts must be made to free up money. Increasing taxes and cutting spending will not work on their own – they must be done simultaneously. The EPA and the TSA are two organizations that could be cut drastically and incorporated into related departments. The Department of Education should also be shrunk, for it should never have gotten to the point it is now. It receives tens of billions of dollars from taxpayers, just to send the money back down to the states. The cost of moving the money around is tremendous and entirely avoidable. Why not just let the states collect the revenue and use it accordingly? Another example of its inefficiency was its decision to appoint David Johns executive director of the White House Initiative on Educational Excellence for African-Americans and pay him $123,758 while at the same time making sequester cuts at the classroom level. The Department of Housing and Urban Development has also grown too large and should have its funding decreased. Furthermore, SNAP and other benefits provided by the US Department of Agriculture should be limited to the neediest of citizens. Just like Faust entered into a contract with the Devil and paid dearly for it, we have entered into a contract with a devil. Except this devil isn’t Mephistopheles, it is the Nanny State.
If the people of the United States don’t learn to live within their means, and if the government doesn’t start making decisions voters may not like, then people will face real hardship. If people don’t suck it up, do without some government services and pay higher taxes, they will pay dearly in the end. As a college student, I always tell people that it is better to live off of ramen, veggies, and milk for a couple of weeks (which isn’t pleasant), than to eat filet mignon one week and starve the next.