Sunday, July 24, 2011

The Debt Problem

The current fiasco surrounding the debt crisis is more than just a clash of ideologies.  There is a real possibility that tax rates will become so high (by some estimates, top marginal rates will hit 70%) in order for the U.S. to service the interest that capital flight (disinvestment in the country's wealth producing assets) will occur.  Consider the U.K. in the 1950s and 60s.

More critically, the lost of credit worthiness will damage the country's geopolitical influence, which depends on moral suasion. It will become difficult to rally allies to global health, environment, and security causes.  Hence, the drive to reduce the size of government and future entitlement is more than just a fight over how household wealth is allocated but has to do with the sustainability of the U.S. as a world leader.

Yet, America and Americans are known for compassion, pragmatism and generosity.  Such qualities are also the basis for her moral authority in world affairs.  Therefore, in cutting entitlements, we must be sensitive to how we are seen to treat the less fortunate, the less able, and the less well endowed.  The cure would be worse than the disease if we ignore this defining American quality. In short, a middle ground needs to be carefully navigated. To do so will require a depth of humility never seen in politics and personal sacrifice experienced only twice or thrice in this country's short history.

The good news is that America has shown time and again that it is capable of innovating its way to a brighter future, as long as it remains an open country and able to attract the most talented to her shores.

2 comments:

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