Economic crisis in contemporary times

Government Expenditures

The 2012 election cycle is about the economy, yet a central piece of the debate between Republicans and Democrats over who can best fix it is one of helping the middle-class. On this point both parties agree that the middle-class is hurting and something must be done to help them get back on track. Yet, here is where the agreement ends; many politicians favor an ever increasing role for government in the form of subsidies and expansion of entitlements to combat the middle-class decline. Others favor cutting government expenditures to free up the private economy, reduce the deficit, and remove the national debt burden on future generations.

In "Even Critics of Safety Net Increasingly Depend on it"; Binyamin Appelbaum and Robert Gebeloff point out that these spending decisions are not as black and white as they appear. Yet, the reality is that the path of government spending is unsustainable. As House member Chip Cravaack said "it's time to cut up Washington D.C's credit card" (Appelbaum & Gebeloff 3). The only long-term solution for a prosperous American economy and a healthy middle class is to drastically reform spending.

The Expenditure Dilemma

Government spending has ballooned over the last decades regardless of which political party has maintained power. "Across the nation, the government now provides almost $1 in benefits for every $4 in other income" (Appelbaum & Gebeloff 1). Much of these spending commitments will come in future years as entitlement programs: Social Security, Medicare, and Medicaid dominate the federal budget and overtake revenues. The spending surge is as much philosophical as it is the math of expenditures exceeding revenues and fewer workers to finance retiree benefits. "The nation must choose between an 'entitlement society' and an 'opportunity society' says GOP contender Mitt Romney" (Appelbaum & Gebeloff 2).

Two fundamental issues underpin the entire debate: first "almost half of all Americans lived in households that received government benefits in 2010" (Appelbaum & Gebeloff 3); yet nearly the same percentage pay no federal income tax. These figures are incompatible for a society that demands strong economic growth and a social safety net. If America is to remain the global engine of prosperity and the driver of a steadily increasing standard of living for her citizens then fundamental reforms must be enacted.

Solutions for the Future

Even a quick look at budget documents for the next few decades indicate a system burdened with exploding costs of Social Security, Medicaid, and Medicare; the latter the powder keg of the debt explosion. A reform of Medicare in which there is "only $1 in Medicare taxes for every $3 in benefits likely to be received in retirement" (Appelbaum & Gebeloff 6) must be a Congressional and Presidential priority. Returning the program to a role of insurance rather than a direct coverage program would be a start; Paul Ryan's proposal of premium support is a working model. Social Security must also be strengthened with common sense adjustments in payroll tax collection and age eligibility.

Those are the entitlement reforms however; these changes also forego the numerous tax expenditures which increase the government tab. The earned income tax credit, home mortgage deduction, and education credits are tax code distortions which increase the national debt. It is time to completely rework the tax code and eliminate these carve outs to streamline the system, lower rates, and pave the way for a massive expansion of economic growth along with increased revenue flow to the federal government.