The Moment of Truth
The report of the National Commission on Fiscal Responsibility and Reform was initiated in 2010 and was frequently submitted for voting. It had the proposals with regard to the President’s initiative to reduce the external debt and cut the government spending. The developed measures were not accepted unanimously, as they had critical and disturbing moments. The range of the issues essential for the ordinary Americans was raised and touched every economic activity. The controversy concerned the points that were important for the development of the U.S. economy but occupied the weak positions in the perspective plans relating to political and economic spheres.
The issue of the external debt of the USA that reached $13 trillion was expected to be settled by employing economic, particularly fiscal, tools and appropriate reforms. It should be noted that the current characteristics of the modern fiscal policy is that in terms of global operations, the resolution of the profound economic crisis has been considered as the functional feature of the developing budgets (The National Commission on Fiscal Responsibility and Reform, Bowles, and Simpson 3). Thus, the practical steps mentioned in the program were probably aimed at avoiding the recession during the particular business cycle. Determining the direction of the developing proposals to settle the financial problems of the country, the authors remained some aspects to be implicit. Every observer has admitted the short-sightedness and time scarcity of the report in front of its strategic scope and vital aspects of governmental attention aimed at cutting the operations’ expenses.
The project under analysis is oriented to the reduction of the debt in long-term perspective. Nevertheless, it seems short-sighted regarding the social aspects. Outlining patriotic tone of the project, the authors developed the measures to increase the retirement age that somewhat did not correspond to the requirements to achieve the economic recovery (The National Commission on Fiscal Responsibility and Reform, Bowles, and Simpson 3). The investment in the social development and the striving to obtain the competitive advantages are not possible without insuring the welfare of a society. Thus, the divergence between the social and fiscal policies would harm the performance of the transformation reform concerning the distribution of the general government finances.
Since the life costs have increased, this step was offered. Nevertheless, this general indicator has been inappropriately defined, since it even included those people who were not educated enough and needed the reforms to raise the life level. Hereby, this stagnant rate made the government unable to collect the amount of needed funds to cover the financial gap. They have notified in advance about the painful solutions of the plan realization, thereby expanding the tax base in the way that clarifies the tunnel vision.
Apparently, another presumptive measure was the reduction of spending concerning the overseas bases and further jobs cuts. However, it is not an appropriate source of the expenditure curtailment. Moreover, the defense area would lose the huge amount of workplaces and face numerous problems. The project underestimated one of the competitive features of the nation, while emphasizing the necessity to provide the social security and competitive economy. Thus, taking these steps would form the fragile defense system (The National Commission on Fiscal Responsibility and Reform, Bowles, and Simpson 3). According to this report, during the reduction of spending, the government would not be able to promote the social security in that way, especially in front of the American participation in several war operations. While retrenching the military spending on peacemaking and involvement in the internal situations of other countries, the USA would benefit much more than from the internal cuts.
Predicted 15% reduction of defense procurement is unnecessary and arbitrary, according to the observance of the National Security Strategy provided by the President. It is hard to perform it per year at once, since it requires a long-term perspective. In fact, the sum could be much lower since it did not represent the main part of governmental costs. The forecasted reduction of $200 billion would bring serious consequences for the economy regarding the unemployment and weakening the national defense (The National Commission on Fiscal Responsibility and Reform, Bowles, and Simpson 3). The report did not include the results of such cuts that should be determined, especially when foreseeing the decline of employment rate, according to the military-oriented companies followed by the reduction of defense procurement. The plans of such collapsing and cutting overseas bases should be seriously considered with regard to the capabilities of the regional situation and economic conditions. Described measures should not be performed during one year because it would embarrass the defense companies and other industries. Thus, the results of such cuts threaten the whole production chain of the country.
The reduction of the governmental costs on the defense emphasizes the importance of economic and ecological safety is as vital as the military one. In fact, these aspects require the complete understanding of this connection in order to satisfy the following need to allocate human resources and reorganize the production volume, its structure, and external relations. The introduction of such serious changes would lead to serious consequences. If the country spends money for the defense from the taxes, then the planned increase in taxes should insure the maintenance of military. Moreover, if the government decides to accept the report measures, then it should take into account that the tax raise would lead to the increase in savings. Avoiding the additional emission and the defense financing, the report did not mentioned the appropriate financial stimulation of medical care and education by the government. The duration of the reformed fiscal policy measures that are necessary for reducing the national debt through the described cuts is highly uncertain and is directly dependent on the business cycle and the state of the U.S. economy.
One of the most complicated proposals of the Commission report concerns social issues. The offerings aimed at reducing the deficit include the expenditures reduction concerning the social sphere, namely pension funds and health insurance, especially relating to the Americans with low income (The National Commission on Fiscal Responsibility and Reform, Bowles, and Simpson 3). First of all, the base of the forthcoming measures is complicated laws and mechanisms. It would trouble the one-year performance of the report performance. Secondly, the planned reduction concerns social benefits. In other words, it would strike at weak points of socially unprotected Americans and cause social pressure and suffering. Nowadays, the utilization of these benefits is vital to the large amount of potential voters; thus, the reduction of these social benefits would affect the electorate decision.
Moreover, the reduction of governmental costs on social system would have negative influence on the medical care. It seems more profitable for the insurance companies, since they may increase the spending that is supposed to be paid by the regional and state budgets. Hereby, the report did not take into account the volume and quality of medical services. Although it can vary, it does not hasten to grow. In addition, the willingness of some specialists to work in the places that are financing through the medical insurance funds would face the reduction of the payments while performing the bureaucratic procedures. Consequently, it would make the professionals refuse the patients who use the insurance from the budgets. Moreover, there is a problem with the legal action that occurred with the patients suffering from the medical failure and limited entitlement payment.
As for the pension reform, the report emphasized the importance to provide the pension for the authorities, while there is a proposal to reduce pension budgets and promote complicated laws. The problem is that the pension system could be sufficient according to the existing birth level and lifetime. During the last century, these indicators are characterized by the decline that is less noticeable compared with other countries. In this case, the reduction of the pension rate could create negative consequences for the elderly Americans. Decreasing the pension funds, the national system would feel free to save the ability to settle the debt, but it is fraught with the necessity to increase the retirement age (to 67 years in 2027) (The National Commission on Fiscal Responsibility and Reform, Bowles, and Simpson 3). It is important that the Commission would take responsibility to explain the new procedures aimed at obtaining social benefits. Therefore, it provides the potential opportunity to increase the pension. Owing to these actions, the government would be able to reduce the debt until 2035. According to this long-term goal stated in the report of the Commission, the social reforms would serve as the means to solve the problem of the debt and the deficit of budgets.
The essential and important aspect of the report concerns the promotion of education, professional training programs, the investment in the research and development, and support for innovation. Moreover, these directions are defined by the President as the key tools to save and strengthen the competitiveness of the U.S. economy in terms of global development. Nevertheless, the priorities were not supported enough through the parliament debates and the proposal to cut government spending. These ways to save money would not contribute to the further development even after the particular debt cut.
At the point when this report was considered, the proposals were not enough to significantly change the situation and would even make social circumstances worse. Although they are permanent, they have been considered only for a short period. The other disturbance concerning the realization of this program is represented by the political balance and containment that makes impossible for the reform to correctly performance. Since the report belongs to both parties, it creates difficulties with compromises between the republicans and democrats of the U.S. government. Paralyzed law draft and the necessary program action do not act in favor of the economy as the debt may slowly grow. In fact, such political obstacles are negatively accepted by the social opinion and influence the potential distribution of votes. The delay in the realization of report measures created the problems concerning the issue of the reduction of the federal spending on social programs and defense. It was impermissible for both parties; thus, the result of these debates was presented in the report with unfavorable necessary steps.
To summarize, it is obvious that the U.S. needs the revolutionary changes to settle the debt and remain the powerful country with the prosperous and developed economy. However, the attempts to implement reforms that are able to lead various socioeconomic areas to default would be the mistake of the government. Breaking into two parties, it might produce negative results such as the increase in the rate of unemployment, intensification of social pressure and business dissatisfaction, decrease in production, and tax burden. The country needs practical steps to reduce spending, but it should not base on cutting costs on the industries’ growth and social and military safety. Since the government is striving to increase the tax, it should not concern the entities and part of society that is unable to withstand it. There are many disadvantages of the report of the Commission, but during its practical performance, the weaknesses could be removed through the development of crucial issues.