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Tough Sacrifices Needed to Solve Debt Crisis

By    |   Thursday, 07 Apr 2011 02:21 PM

A few nights ago, I sat down at home after a long day of work. I flicked on Charlie Rose. I went into the kitchen to grab a drink and while I was there, I heard a sort of nerdy-sounding voice speaking. I could tell just by the tone and what was being said that this was a very smart person.

I didn’t know who it was. I could tell the individual who was talking about the deficit problem wasn’t an economist but he had common-sense, realistic solutions. It happened to be Bill Gates, Microsoft co-founder and chairman.

His basic solution was that there needs to be a combination of spending cuts and tax increases to solve the deficit. This is the truth, no matter what a far-left liberal or far-right conservative wants to tell you.

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Personally, I am a libertarian. However, I am also a realist.

I realize that to solve a debt crisis, you must make sacrifices on both sides. You’ve got to slash government programs and increase revenue to close the gap. You also must deal with unfunded liabilities, which will be the major cause of the deficit going forward.

The major problem in both political parties is they don’t want to do this. Both parties also have no real plan to balance the books.

President Barack Obama’s budget wasn’t a real budget plan but rather a vanilla political ploy to force the Republicans to make the next move.

Rep. Paul Ryan’s budget was a lot better but still has a lot of problems.

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For example, it says that government revenues will increase from just over $2.1 trillion this year to over $3 trillion by 2014. That is very unrealistic. He also actually cuts income taxes. Cutting taxes won’t work like it did in the 1980s because the consumer is so indebted and energy prices are so high, they will use most of this money to pay off debt and pay for gasoline.

If, for example, you introduced a national sales tax in the 5 percent range, estimates show it could raise anywhere from $300 billion to $500 billion, which could cut the deficit by nearly one-third. However, if you raised income taxes to pre-Bush levels, it would raise about $140 billion a year, which barely puts a dent in the deficit.

Ryan’s plan also doesn’t really cut spending. Rather, his plan just slows the growth of it. The $3.7 trillion budget shrinks to about $3.5 trillion for a few years, then increases to well over $4 trillion by the beginning of next decade.

I think it will take radical cuts in the $500 billion to $1 trillion range to really get things under control.

It is unrealistic to think that we can grow our way out of this by taxing the rich or cutting taxes. It is time to undergo massive spending cuts and tax consumption if you really want to solve the deficit problem going forward.

About the Author: David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now

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A few nights ago, I sat down at home after a long day of work. I flicked on Charlie Rose. I went into the kitchen to grab a drink and while I was there, I heard a sort of nerdy-sounding voice speaking. I could tell just by the tone and what was being said that this was a...
david,skarica,Tough,Sacrifices,Needed,Solve,Debt,Crisis
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2011-21-07
Thursday, 07 Apr 2011 02:21 PM
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