Defusing National Debt Bomb – It Can Be Done – Here’s How
Tuesday, March 9, 2010, 2:18 AM | Leave Comment
Fareed Zakaria writes for Newsweek and is a commentator on CNN and has his own show on Sunday, again on CNN.
He has written an article published in Newsweek on Feb 26, 2010 and has titled it “Defusing the Debt Bomb. It can be done. Here’s how.”
I found it very interesting to read and be informed. To bring back [the last couple of years of Bill Clinton’s Presidency] federal budget surplus, he has proposed three steps to be implemented by the Federal Government.
Mr. Zakaria’s three propsals are as follows:
Implement National Sales Tax
Creating a National Sales Tax will definitely be followed by some kind of reduction in individual income taxes to compensate and to have a balance in families’ budgets that are already under extreme burden.
Eliminate subsidies for home-ownership, health care, and agriculture
The interest deduction on mortgage has encouraged the massive accumulation of debt that is at the heart of the current crisis.
Tax exemptions for employer-based health plans encourage over-consumption of health services.
Agricultural subsidies, mostly handouts to large agribusinesses, are so egregious and market-distorting, one doesn’t really know where to begin.
Tie benefits to rises in inflation, not wages
This could save the government hundreds of billions of dollars. Then raise the retirement age by a couple of years, and link it to life expectancy, which increases by three months every year.
Mr. Zakaria has given examples of how Canada and some economies of European countries have successfully implemented the above proposals over the decades since WW II. These are, by and large, economies of socialistic nature.
In a Nutshell
If you think about it, different kinds of subsidies are available in mostly socialistic economies and that’s what most of the European economies are. Mr. Zakaria’s comments make sense, especially when the U.S. economy follows capitalistic behavior. Some economists suggest that in capitalism, subsidizing by the government does not make sense. They are mutually exclusive in nature.
What do you think?
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