unclej0

The U.S. Debt Quandary

There is no need for hysteria. Our problem of changing from a consumer nation to a saving nation can be accomplished in moderate ways.

For example, by ending payroll taxes and employer pensions and health care benefits, we can make our manufacturing much more competitive.

The pensions and health care then become social costs, not labor costs. Where will the money come from? Institute a VAT. This will make tariffs unnecessary, as it will tax imports as much as US products. The higher cost of imports will encourage saving. This will improve our balance of payments and make it easier to control inflation.

There are two important downside factors.

1) The VAT? A new tax!!! How very European!!! This problem is political. Will any elected office holder risk his precious incumbency to serve the nation? Maybe a few but we need a majority in the House and a super majority in the Senate. We will indeed have to exhaust all of the alternatives before doing anything rational.

2) Our beloved global capitalism feeds on growth. In order to moderate American consumption we shall produce a period of recession. This cure is necessary and if we dont take the medicine soon it will be forced upon us with much more pain later.

These are the conditions that prevail. I wish Obama well. He is a decent man, an intelligent man, and a competent man. He has a very brainy cabinet. But can they do the politically impossible?