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Our nation’s financial position is perilous. We have neverin modern times faced such a dangerous, ongoing imbalance between the levels offederal spending and revenues. Our federal debt as a percentage of our economicoutput is greater than at any time since the end of World War II.
The Congressional Budget Office projects that in a decade our national debt willreach $20 trillion—90 percent of our economic output (GDP)—with more than halfowed to foreigners, many of whom we cannot count as friends. At that pace,interest on the federal debt will cost us a trillion dollars a year.
Our population is aging, with fewer workers funding SocialSecurity payments for each retiree. We have no proven plan to control excessiveand rapidly rising health care costs, so the nation’s financial situation willonly get gloomier. These are facts, not forecasts. We are heading toward a cliff,risking the economic well-being of our children and grandchildren.
We must curb our government’s spending. But we must not cutSocial Security or Medicare benefits for low- and middle-income retirees.Americans will have to work longer, retire older. And high-income retirees willno doubt see their benefits cut or taxed away.
Even with such changes, our nation’s taxes will surely haveto rise. We need a tax system that supports economic growth, not one thatstymies it—a system that fosters investment in America and is fair and simple.I have proposed such a system. It has four key pieces.
This competitive tax plan has significant advantages.
This kind of reform would let us address our nation’sfinancial problems without hindering economic growth. People often tell me itis impossible politically. But given our nation’s dire financial difficulties,changes long thought impossible must become inevitable. Our challenge is toelect leaders with the political courage to seize this opportunity and averttrue disaster.
Michael J. Graetz, a Columbia Law School professor, wrote 100 Million Unnecessary Returns, published by Yale University Press.
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