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With Moody's credit warning, it's time for U.S. to suck in its deficit glut

Our military has its own "don't ask, don't tell" policy. So does our red-ink economy.

As in don't ask us how to cut the nation's soaring deficit. That way, we don't have to tell you what most of you don't want to hear: how hard it will be to really cut our deficit and end the U.S. status as indebted servant to China.

The newest reminder of Spendthrift America is credit rating agency Moody's. Last week, it warned that anemic U.S. growth, on top of already stretched government finances, could put pressure on the country's AAA rating.

Lose that rating status, and the United States would face a major loss of global prestige. And it would endure increasing costs of borrowing money, a necessary evil for a country burdened with a $1.6 trillion budget deficit this year. Heck, we spend $400 billion every year just to service the national debt.

Most politicians and economic leaders don't want to tell Americans to work longer, tighten their budgets, pay more in taxes and expect less (not more) from the federal government. "Don't ask" how much two Middle East wars are costing us, so we "don't tell" why we never imposed a specific tax to help cover the wars' astonishing price tags. What happened to sacrifice at home?

And "don't ask" what portion of federal spending is eaten up by Social Security, so we "don't tell" you it's so enormous that it's hard to make cuts big enough elsewhere in government spending to make much difference.

As usual, Washington's still in la-la land, counting on our economy to rebound and, by growing, generate more taxes, thus easing the pressure on U.S. indebtedness. The problem? U.S. borrowings are huge while forecasters say the economy will revive very slowly. The budget isn't going to balance itself just because the recession is technically over.

So here are five ways to get this country back on a sounder footing. These are recommendations espoused by many experts on debt reduction ranging from liberal-leaning Brookings budget maven Isabel Sawhill and conservative Columbia Business School dean (and ex-chairman of President George W. Bush's Council of Economic Advisers) Glenn Hubbard to Bloomberg News columnist David Pauly.

A bipartisan, 18-member debt commission is supposed to forward deficit-reduction proposals to Congress after this year's midterm elections.

Let's help them out. Nobody likes to take away the punch bowl from a party already on reduced rations. But if we don't act, we'll watch the Next Economic Bubble — government red ink — deliver us deeper into China's pocket.

Frankly, we're in a drastic economic time in need of drastic remedy. There's no point in nibbling around the deficit's edges. So here are five real ways to reduce the bubble before it bursts.

5. Reinstate all income taxes — not just those for people earning $250,000 or more — to the levels before President George W. Bush cut them. Phase them in until we've moved further away from this recession.

4. Work longer by raising the retirement age for collecting full Social Security benefits to 72. Raise the age for Medicare eligibility to 68.

3. End income-tax deductions for property taxes and mortgage interest, and eliminate farm subsidies.

2. End the wars in Iraq and Afghanistan on schedule — or persuade the rest of the world to help pay for a lot more of their staggering expense.

1. Reduce the size of government. Show some willpower!

Here's one more proposal just so Florida really gets the difficult financial message: Forget about NASA sending men back to the moon.

Do we have the backbone to implement many of these ideas? Doubtful, but don't worry. China will do it for us soon enough.

Contact Robert Trigaux at trigaux@sptimes.com.

With Moody's credit warning, it's time for U.S. to suck in its deficit glut 02/08/10 [Last modified: Tuesday, February 9, 2010 7:03am]
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