Defusing the Debt Bomb

Fareed Zakaria is one of my favorite liberals.  He and conservative George Will account for 99% of the brainpower over at Newsweek. Zakaria has written a short, smart and well-reasoned article on how to tackle the nation's mounting debt. 

I don't agree with everything he said, and it's a little simplistic, but journalism such as this is what we need to help us understand complex issues.

He lays out three simple proposals:  Adopt a VAT, end certain subsidies, adjust entitlements

"Adopt a Value Added Tax (VAT)" 
I am only for this if we completely scrap the current tax code on US citizens and businesses.  None of this "we'll impose VAT now and adjust the income tax to compensate..."  No way.  Scrap it.  Then we can talk about the VAT.

A VAT is progressive, especially if basic food staples are exempted.  Rich people buy more stuff and more expensive stuff, so they would pay more tax under this plan.  It also removes the penalty for saving and investing while promoting capital formation that powers job growth.

"End the massive, distorting subsidies for home-ownership, health care, and agriculture"
I'm willing to raise Fareed on this one:  End ALL subsidies!  Let the free market chips fall where they may.  If it's a good idea it will survive; obsolete solutions will succumb to Schumpeter's creative destruction.  Up from the ashes will grow new ideas, new jobs and new solutions to society's challenges.  

"Make sensible adjustments to entitlements"
This will have to be done, one way or another.  Entitlements constitute around 50% of the federal budget and the share is growing, along with interest payments on the debt that fund these programs.

Slowly increasing the retirement age is one way government is already doing this.  "Ending Welfare as we know it" was another.  The greatest leap would be to wholesale divest the federal government of all extra-constitutional function and free up individuals, families and communities to tailor problem solving to each one's unique situation.

Fareed Zakaria, like Paul Ryan, has done a public service by putting his ideas out there.  You may not agree with them, but we need a vigorous debate on how to avoid fiscal calamity while not starving everyone in the process.  Putting government on a diet would be a good first step.