Dear President-Elect, You Have Inherited $10...

Dear President-Elect Obama,

In many ways it seems that you have already accomplished the improbable and even what some would say was impossible by being elected to office. However, I urge you to use the wave of optimism you have created among Americans to address the ominous financial future of the Federal Government. While it is undoubtedly tempting and easy to focus on the short-term economic instability of our country, I urge you to uphold your reputation for being a foreword thinker by addressing the debt the United States faces. For decades American Presidents have avoided the problem because solutions can involve unpopular tax increases and reduced benefits, however I am confident that you have the courage to address our debt, as you have made it clear that precedence has never been ample reason for you not to pursue something.

While many contend that concrete problems from our enormous national debt will not be seen in the near future, we will see the ramifications of financial irresponsibility in just a few years. As you know, our current debt has surpassed $10 trillion and the deficit for this fiscal year alone is over $400 billion. The bailouts of this fall have only dug the hole deeper and Americans will see the consequences of such spending within your first term. Assuming that we continue on the same trajectory, in 2012 the first baby boomers will start to collect full Social Security benefits in large numbers and by 2017, Social Security and Medicare will contribute to debt instead of cushioning federal revenues each year. By 2030 all spending will be consumed by Medicare, Medicaid and Social Security. This frightening information is not publicized enough, and therefore not many Americans grasp the severity of our current financial standing. Americans will understand when $50 trillion of unfunded liabilities cannot be fulfilled, but by that time it will be far to late to fix.

The first matter that needs to be addressed is our national debt by focusing on increasing federal tax revenues. While many believe that low tax rates encourage economic activity, there are serious benefits from raising the current level of taxation. During the campaign you proposed tax cuts that would put taxes below 18.1 percent of GDP, however this rate is below the forty-year average percentage of 18.3 percent, which has contributed to our financial problems in the first place. I urge you to increase taxes in order to keep up with federal spending. Allowing the Bush Tax Cuts to expire in 2010 is also major part of the solution to increasing revenues. According to the Center of Budget and Policy Priorities, letting the tax cuts expire, while offsetting the costs could reduce the projected fiscal problems America will face in 2050 by 60 percent. Since the cuts were enacted in 2003 it has been estimated by the Center on Budget and Policy Priorities that the federal government has will lose a total between $12 and $14 trillion in revenues. Finally, it is imperative that the earning cap for taxable income be raised from $90,000 to at least $125,000. The current cap is outdated and raising the cap even just a small amount would yield sizable revenues.

There are specific changes that should be made to the Social Security program in order to ensure its solvency. The most pressing matter is to increase the age of eligibility for full benefits. Life expectancies for Americans have continuously increased, making the full benefit age of sixty-seven out of date. The retirement age should be incrementally moved up to seventy over the next ten years. Americans should also pay more Social Security taxes on their earnings, as currently Social Security is only taxable up to $102,000. According to the CBO, if the cap were to be moved to $250,000, almost $285 billion would be generated for the Social Security program within your first term. Along these same lines, wealthier Americans should not get benefits they do not need. While it is unfair for wealthy Americans to put money into funding these programs, but not get anything in return, I believe we should look into restructuring the program so wealthy Americans do not get unneeded support.

Throughout your campaign you promised healthcare to all Americans, however serious reform of Medicare needs to occur before the program is expanded. Medicare spending alone increased by 13% just in 2007 and will continue to increase between 7% and 8% annually as the number of Americans over 65 will surpass 62 million by 2025. The first of many healthcare issues to tackle is decreasing the growth of healthcare spending. In fact, health care costs are more than twice as high per capita in the United States than the rest of the developed world, with no notable differences or outcomes in longevity. While there are over a dozen different ways experts have suggested to reform Medicare, I will mention a few limited first steps. Creating an institute to study what the most successful and cost effective practices would be a way to obtain definitive data on what forms of medical care should be paid for by the government. This institute could set up a federal medical database and standardize the costs of medical care. The eligibility age for Medicare should also be moved up to seventy to mirror an increase in the age for full Social Security benefits.

It is easy to become enveloped in the problems we as a nation face right now because you do not want to disappoint your constituents. However, I cannot urge you enough to transcend such shortsightedness and take on the enormous problems with our federal finances. For decades we have passed down the burden of our national debt to subsequent generations, but we have run out of time to procrastinate. Please, Mr. Obama, continue to do the unexpected and to work with both parties to solve our nation’s fiscal failures.

Sincerely,

Samantha Braun

Sources:

The Concord Coalition, Concordcoalition.org
I.O.U.S.A Dir. Patrick Creadon, Roadside Attractions, 2008
Bittle, Scott and Jean Johnson. ¬Where Does the Money Go? New York: Harper Collins Publisher, 2008.
Yarrow, Andrew. Forgive Us Our Debt New Haven and London: Yale University Press , 2008.
The Peterson Foundation, http://www.pgpf.org/