Debt Crisis: Medicare, Medicaid & Social Security v. Raising Taxes

The two links below are an NYTimes and an Economist article on the debt crisis and the continuing battle between Democrats and Republicans.

Hence the argument for “going big” now—concocting a deficit-reduction package of $3 trillion or ideally $4 trillion, big enough to convince investors that America’s long-term problem is being tackled (and thus also leaving more room for the short-term stimulus the economy still needs).

To get to such a big figure two things must happen, one unwelcome to the Democrats, one hated by Republicans. First the Democrats would have to put entitlements, the legally mandated programmes of Social Security (pensions), Medicare (health care for the elderly) and Medicaid (health care for the poor), on the table. Pension reform might very well be possible; there is widespread agreement that the pensionable age needs to rise and that benefits will have to be means-tested. But the far bigger problem is health entitlements, and the Democrats, having only just conducted an enormous health-care reform in the teeth of Republican opposition, are deeply reluctant to do anything that might reopen that deal.

The other problem is taxes. No rational person believes that serious deficit reduction can be accomplished without any rise in tax revenues. The Republicans objection to tax rises is well known, but may not be absolute. The idea of raising tax rates is clearly going to remain anathema. But the tax code is such a morass of loopholes, breaks for the politically favoured and economic engineering on the part of bureaucrats, that comprehensive tax reform could allow for lower rates and yet increase tax receipts at the same time.

This last link answers a few general questions about the debt crisis.  I personally did not know a bill proposal for debt reduction would not be able to be amended or face a filibuster.


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