Lately on this blog I have been discussing a variety of serious problems faced by our country such as slow economic growth, income inequality, global warming and external threats from major foreign rivals. These are all big problems which need to be addressed by our political leaders.
But the biggest problem of all is national debt. The reason is that it is caused primarily by the growth of entitlement spending, especially healthcare costs such as Medicare and Medicaid. These rapidly increasing costs (see chart) must be slowed down which will require involvement and some sacrifice from many ordinary, non-wealthy people. This will be very hard to accomplish by elected politicians. It may take an extreme fiscal emergency to make the necessary spending adjustments.
The other problems listed above can be solved by less drastic measures and are therefore more readily accomplished. For example:
- Global warming. The evidence for global warming is very strong. The solution will have to involve more than ad hoc regulatory measures on fossil fuels. The best approach is to enact a (revenue neutral, i.e. refundable) carbon tax which would apply to all carbon emissions. Already 70% of the American populace agrees that global warming is man-made and needs to be addressed. As this percentage continues to increase, I am confidant that our political system will respond in a satisfactory manner.
- Slow economic growth and income inequality. Recently the economy has started growing faster and the unemployment rate has dropped to a fifty year low of 3.6%. Already wages are rising faster at the lower income levels as employers struggle to find enough workers. This is the best way to address income inequality.
- Threats from autocratic powers such as China and Russia. America cannot afford to be complacent about our dominant superpower status but we have many strengths in our favor including demographics, entrepreneurial spirit, and a strong willingness to make sacrifices for freedom.
Summary. I am an optimist by nature and I am optimistic about the future of our country. But I don’t see how our democratic political system can solve our debt problem through the usual political give and take. I’m afraid that it will take a severe fiscal crisis, much worse than the financial crisis of 2008, to somehow get our rapidly increasing debt under control.