AYINDE J. STEVENS
Last week’s Hot Topics event went into deep philosophical territory, the type that goes from debt to taxes, and everything in between.
The event, “The Debt Crisis: How it Affects You,” was held at the Orangerie on April 30, which seemed fitting since income taxes were due on April 15.
The panel, which was moderated by political science professor Bruce Peabody, consisted of Tom Strowe, a junior political science major and board member of Fair Tax New Jersey; Burton Zwick, a professor of economics and finance; Dan Cassino, a professor of political science; and Joaquin Villanueva, a professor of geography.
Peabody posed the question, “Why are we talking about a debt crisis?” He also commented on why this “crisis” gets more press than others.
Peabody then asked the panelists to keep their opening statements short since “it is a relatively wonky conversation.”
That way, anyone who was not familiar with the topic would not get lost and the panelists would not go off on tangents.
Strowe, who went first, responded to Peabody’s question by using the “how it affects you” angle. He first pointed out that “long-term debt can harm the fiscal health of this country.” Adding factors such as slow economic growth and higher interest on that debt will limit investment, therefore adding to the problem and creating what is known as the “crowding out effect.”
According to Strowe, college students who are saddled with loans with high interest rates and with little to no job prospects are out of the loop.
Strowe pointed out that the Fair Tax Act could be used to help balance debt since it no longer taxes a person’s income; instead, it adds a sales tax, which everyone pays. Strowe advocates that the current complex tax code be thrown out. He also recommends removing the Internal Revenue Service.
Strowe expanded further by saying that, according to research he has done on the issue, doing this will allow G.D.P. to grow by 10.5 percent and capital spending will jump by a whopping 70 percent. He added that Social Security and Medicare, which are major contributors to the debt crisis, need reform in order to stay in existence.
Zwick, who went second, elaborated on how Social Security and Medicare are contributed to the debt. Zwick pointed out “that people are living too long” and joked that a “way to solve this problem is to reintroduce the smoking program,” which drew some laughter from the audience, some of whom were easily over 50 years old.
Some solutions he suggested would be to raise the age up to 69; use means testing, which gives less money to elderly people who are wealthier; and replace the rate at which Social Security is calculated.
Zwick then switched to Medicare, which is much trickier to solve. There is a bipartisan agreement that something has to change “otherwise it is going to consume us,” he explained. What Zwick found encouraging is that medical costs have stabilized so Medicare may survive; depending on which Medicare proposal – by either President Obama or Congressman Paul Ryan – gains traction. “Either way we are going to rein in the cost of Medicare,” he said.
Cassino, who went third, pointed out that, since the Fed is offering interest rates as low as zero percent, it is not affecting the economy. Rather, the debt crisis is a crisis in morality.
Cassino argued that people put “a level of morality into our discussion of the debt” and that, until the 19th century, many Christian countries actually banned charging interests. Cassino went further by pointing out negative connotations to having debt, such as “you obviously spent too much,” “you shouldn’t have done that” or “a sinner.”
Cassino then argued that, from an economic standpoint, there are some benefits to debt. For example, you should go into debt so you could be more productive in the future. So, according to Cassino, going into debt by buying that extra piece of equipment to help expand your business is considered a good thing.
Villanueva, who went last, agreed with Cassino, stating that it is more of a moral crisis rather than an economic one. He then pointed out that the debt crisis makes people feel as if they are “losing some form of sovereignty, as increasingly our debt is tied to foreign investors,” such as China. Due to this, tax and program cuts come into play, which hurts the economy and increases debt.
Villanueva then switched to how student loans affect students because they are “going to be tied to this economy for the rest of [their] life.” This is because all they will be doing is working to pay off their student loans This, according to Villanueva, affects the larger economy since, instead of creating a productive economy, we are creating an economy based on paying off their debt.
Villanueva also argued that debt is now making creditors and credit rating agencies too powerful both at personal and national levels since countries are losing credit statuses due to their debt.
After opening up discussion to the audience, the panel dynamic shifted. Much of the interaction was between panelists, rather than between the panelists and the audience, who seemed quite fixated on how the debate played out – with Villanueva and Cassino on one side and Zwick and Strowe on the other.
There were people who posed questions to the panel, but, for the most part, it was the panelists who held court. Either way, the event was civil: no one shouted at each other or called anyone names; and there was no booing or catcalling to the panel. Instead, there was some laughter from the audience due to some of the panelists’ comments.
Villanueva and Strowe both found common ground in terms of the need for cuts, such as in the military. Cassino agreed with Strowe in terms of the tax code and Cassino agreed with Zwick jokingly that we should start smoking again to reduce the burden on Social Security and Medicare.