With a National debt of almost $14 trillion, America is on an economic path that is unsustainable and that will lead to financial destruction. Erskine Bowles, chairman of President Obama's deficit commission, stated that America is headed for disaster.
The bipartisan leaders of the deficit commission released a preliminary report. They proposed curbs in Social Security benefits, deep reductions in federal spending and higher taxes for millions of Americans. In addition to Social Security, Medicare spending would be curtailed in a plan designed to cut total deficits by $4 trillion over the next decade.
The document was released by Democrat Erskine Bowles, a former Clinton White House chief of staff, and Republican Alan Simpson, a former senator from Wyoming one week after mid-term elections. The 2010 elections featured strong voter demands for economic change in Washington, the report was met with criticism from advocacy groups on the left and, to some extent, the right at the start of the post-election debate on painful steps necessary to rein in out-of-control deficits.
The proposed plan would gradually increase the retirement age for full Social Security benefits -- to 69 by 2075. Recommendations included the proposal that current recipients receive smaller-than-anticipated annual increases. Another controversial recommendation would eliminate current tax deductions homeowners receive for interest paid on their mortgages.
Implementation of these bold proposals in the near future is doubtful. The proposed cuts to Social Security and Medicare are making many uncomfortable, while others are having difficulty with options suggested for raising taxes. The plan also calls for cuts in farm subsidies, foreign aid and the Pentagon's budget. Simpson quipped to reporters: "We'll both be in a witness protection program when this is all over, so look us up." Said Bowles: "This is a starting point."
Bowles went on to say that serious action was demanded. He declared, "This debt is like a cancer that will truly destroy this country from within if we don't fix it." The deficit for last month alone was $140.4 billion -- and for the past fiscal year was $1.29 trillion. Deficits for 2010 are headed for the third straight total above $1 trillion. Current deficits require the government to borrow 37 cents out of every dollar it spends.
The plan was rejected as "simply unacceptable" by House Speaker Nancy Pelosi, a top Obama ally. The White House spokesman Bill Burton said, "The president will wait until the bipartisan fiscal commission finishes its work before commenting." He called the ideas "only a step in the process."
For every $1 of new revenue, the plan demands $3 in spending cuts. That was acceptable to panel member Tom Coburn, a Republican senator from Oklahoma. "If we do the cuts, I'll go for it," he said.
Some of the other proposals by the commission include:
--Increasing the federal gasoline tax by 15 cents a gallon
--A three-year freeze in pay for most federal employees and a 10 percent cut in the federal work force
--Elimination all congressional pet projects, known as earmarks
--A major overhaul of both individual income and corporate tax systems
--Lowering tax rates
--Broaden the tax base
It remains to be seen whether any of these proposals will ultimately be embraced by congress and how they might affect your personal financial situation including inflation, 401(k)s, investments, savings, personal debts, and retirement. Almost everyone is in agreement that America faces difficult financial days ahead and that effective and decisive actions are desperately needed.
We at christianretirement.com would like to see the following implemented immediately…
--The Federal Reserve's QE2 plan must be scrapped
--100% of Congressional earmarks must be eliminated
--100% of deficit spending must cease
--The federal budget must be balanced
--America must learn to live within her financial means
Stay tuned, the future offers many surprises!