Some Washington politicians say the debt default resulting from not raising our nation’s debt limit could lead to economic disaster and another recession. Other experts feel it would not.  Either way, we have a serious fiscal debt problem facing us.

Our long-term deficit is growing. A potential debt ceiling increase of $2 trillion is hanging over us. To reduce our debt, hard choices need to be made on reducing entitlements, cutting government spending and making tax adjustments.  Our debt is so large that no single option will be sufficient. 

Sacrifices are needed across all income levels, to bring our debt under control. Those with high incomes will need to ante up more, and those with low incomes will receive less public support. Our government needs to stop spending too much, and stop being a free army for the rest of the world. We are not rich enough for that role anymore. 

What will occur if the government cannot pay its debt, if the debt ceiling is not raised next year? Interest rates could increase on credit cards, bank loans, mortgage payments, consumer and business merchandise, auto financing, and gas prices. There might also be a substantial stock market drop.

Social Security and other government benefits would be affected. Foreign countries holding U.S. Treasury securities might dump those bonds, forcing interest rates to rise. The end result would be more debt and more interest payments for our country. 

On the other hand, many citizens oppose raising the debt limit. It has increased almost 10 times in the last 10 years. Since late 2007, the deficit has gone from about $9 trillion to more than $14 trillion. A few budget experts have expressed optimism that sufficient monies are available to pay government bills for another year without increasing debt. Of course, we can blame two wars, tax cuts and excessive government spending as the causes for the huge deficit in the first place.

Yet America is still seen as a safe haven for foreign and domestic investments. The euro value is in question. Japan has a rapidly aging population. Our short-term future still looks very positive. We still have the highest technology knowledge, the best skilled work forces and a revitalized, growing economy, although other countries are gaining on us, quickly. Tax reform is necessary to collect monies outside our U.S. territory, from profits made by U.S. corporate companies’ overseas operations. These profits should be taxed, and loopholes closed, to help lower our deficit.

Social Security changes will probably need to include increasing the retirement age. The caps on deductions on payroll earnings will have to be raised or eliminated, which seems fair. After all, someone who earns a million dollars a year pays no more social security tax than someone who earns $125,000. Medicare and Medicaid benefits may have to be revised to keep the system available to everyone. Many people will have to make difficult readjustments, or make do with less, but programs can be saved if changes are made soon.

 We need to cut most entitlement programs and war budgets to get spending under control. The health care law also will have to be revised. It will take courageous leadership, on a bi-partisan basis, to make those changes. A comprehensive long-term plan needs to be established for alternative energy since we do not have the infrastructure to replace our present oil sources from the Middle East in the next 10 years. A lot has to be done, and we’re running out of time.

Some solutions have been suggested to reduce the deficit. A short-term rise in the debt ceiling must be tied to spending cuts in the budget. Tax laws can be revised to eliminate present consumer and business taxes, by substituting a National Sales Tax.

Tax loopholes should be eliminated for all businesses, big or small. Other revenue sources could include a value added tax or a flat tax on all personal and business income. Whatever we do, a simpler tax system is needed that everyone can understand, and no one can avoid, game or beat.

We could head over a cliff by doing nothing, or we can save ourselves and our government’s good credit standing. All things equal, I’d choose raising the debt ceiling and cutting spending right now.

— Bernard Featherman, columnist, is a past president of Biddeford/Saco Chamber of Commerce. He can be contacted by email at Bernard@Featherman.com.