According PIMCO founder Bill Gross, our nation’s debt crisis is so bad that there really is no comfortable way out of it and our living standards are doomed to fall. He says that because the United States is in so much debt that we have no choice but to keep borrowing and borrowing from foreign sources, and those foreign sources will soon start to loose faith in our ability to repay our debt, which would lead to disastrous consequences for our nation (I talk about this in the National Debt section under the Issues page). Gross says that we have only two choices: (1) keep spending and do nothing, or (2) balance our budget by cutting entitlements. Now, I have talked about the need to make reforms to entitlement programs (i.e. Social Security and Medicare/Medicaid), but I disagree entirely that these are the only two choices we have.
Another option we have–although not a popular one–is to raise taxes. Recently, tax cuts for the wealthiest 2 percent of Americans were extended another 2 years, costing our nation over $700 billion. I don’t really see the need for the wealthiest Americans to get tax breaks, and apparently most Americans agree with me on this. I mean, if I had a choice between making $1 million annually and paying higher taxes, or making $50,000 annually and paying lower taxes, I would choose the former. Call me crazy, but I’d rather make more money, even though I’d have to pay more in taxes. Getting back to the issue at hand, at some point I wouldn’t be surprised if we have to raise taxes on all Americans but the poor. Now I know that Americans don’t want their taxes raised and neither do I, but the majority of Americans also don’t want to touch entitlements either. However, we have to make concessions somewhere. And in all honesty, we will likely have to both raise taxes and reform entitlement programs.
Another option we have that Mr. Gross doesn’t consider is we could also cut defense spending. Defense is one of the largest single-line items in our budget right now, taking up a whopping 20 percent, or one-fifth, of our budget. We spend close to $700 billion annually on defense, more than almost all other countries in the world combined. I have a hard time believing that this level of spending can be entirely justified. With our nation in a fiscal crisis, there must some areas of defense spending that can be cut.
I agree with Mr. Gross that the decisions we make in order to address our nation’s debt problem will be tough and will be largely unpopular. But we aren’t only limited to the two options he proposed. And I also don’t think that our standard of living is doomed to fall, at least not permanently. If we are smart and do make reforms to entitlement programs and do raise taxes and do cut defense spending and do whatever else is necessary in order to reduce our national debt, then yes, our standard of living will likely fall. But it will probably be temporary and not permanent. Who knows, maybe the standard of living will start to improve because Americans will learn to be more fiscally responsible, while also requiring the same of our government. I know right now that seems unlikely, but many doubted we could put a man on the moon and we proved them wrong. And when our economy barely had a pulse during the height of the Great Depression, many doubted that it would ever fully recover. But it did, and the standard of living eventually started to rise again. My point is that nothing is impossible. And maybe I’m just being a typical confident and optimistic Millennial, but I think that the best days of our nation may be yet to come.