Salvaging and Growing the U.S. Economy: Moving on with Lessons Learned

Ask most and they will tell you there are two ways to salvage an economy: the revenue side, by way of taxation or fees, or on the the spending side, by way of expenditure reductions. Determining where and how much is the point at which negotiations and compromise get bogged down.

The President re-elect has released his budget for 2013 that the administration believes is fair;  at another time in history the budget would be viewed as pragmatically centrist. But, if the past four years give any indication, it will likely be shredded by the opposing party without much consideration given to how desperately the country needs $80 billion allocated to roads or the $476 billion allocated over 6 years to infrastructure development. The budget shows a belief that continued improvements to the education system are also needed; efficient spending on effective programs, rather than cuts, would go a long way to making the country’s education system more globally competitive.

Some warn against cutting the deficit too quickly citing a renewed recession as the outcome. Still, it’s likely that proposed cuts to the Pentagon budget will continue to be used as a means of gaining political capital by warning the public against America’s decline as a military power — never mind that sources agree the U.S. has no real competition in a global fight as the U.S. outspends more on military might than the next 20 countries combined.

What you won’t hear from congress about the Obama budget is that there isn’t much left to cut from the public sector. An example of just how much cutting we are doing is shown in the fact that America’s peace keeping embassies across the globe will feel the budget ax. There just isn’t much left to cut from the budget aside from the military, Social Security or Medicare. Conservatives know this and would prefer to bypass cuts to the defense budget in favor of eliminating or privatizing as much of Social Security and Medicare as possible, as those are considered “entitlements” despite people having paid into the system for Social Security. Reductions to the military budget could easily be reduced, with savings re-allocated to shore-up Social Security — which does not add to the federal deficit.

So we are left with two options towards achieving stability and growth in the currently murky U.S. economy. The choice now is not to increase taxes or decrease spending — it’s  increase taxes and increase spending. The economy has pulled back from the brink and to grow it, there are public sector investments which will yield both short-term and long-term advantages. The President hit the nail on the head with investment in infrastructure (which we now spend less than 1% GDP on, whereas it used to be over 3% during the Reagan years). Some avenues being ignored which would yield short-term returns include the pathway to legal citizenship, adoption of a public internet to compete with private telecomm providers (wherein speed could be significantly improved by burying fiberwire across the nation), updating our electric grid to smart grids (bury them with the fiberwire thereby killing two birds with one stone so to speak), and technological development at NASA.

Both of those options should be done. After times of war, we raise taxes. In fact, before war time taxes should have been increased in order to prevent exactly the situation we are in now but the Bush administration, riding on the Norquist Taxpayer Protection Pledge,  gave tax breaks instead. Many taxes, such as the capital gains tax, offshore accounts and closing loopholes used by the Big Oil industry won’t adversely affect the average taxpayer. The bottom line is that the U.S. deserves and needs more than what the President’s budget allots.

 


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