ISAAC AND KOVACEVICH: Global fiscal crisis requires change we can trust
We are facing a fiscal crisis that threatens the future of our great nation and the quality of life we leave to our children and grandchildren. The solutions are straightforward, but we can’t seem to muster the political courage to implement them. Too few want to sacrifice for the common good — take it from my neighbor, not from me.
Today, 2 percent of Americans pay more federal taxes than the remaining 98 percent combined. Nearly half of us pay no federal income tax. The 2 percent pay more than half of the cost of our national defense, assistance for those in need, laws and regulations to ensure our safety, police and fire protection and other services.
Some think the 2 percent should bear even more than 50 percent of the burden. Others think it is wrong that 49 percent of Americans pay no federal income taxes — more than triple the percentage in 1985.
Whatever your thoughts, we all need to understand that our taxes are not paying for all we spend. We are running deficits of more than $1 trillion a year that will have to be paid by our children and grandchildren. We cannot continue on this path.
Federal expenditures have averaged about 18 percent of gross domestic product (GDP) under both Democratic and Republican administrations since World War II. They have risen to nearly 25 percent the past few years and are still climbing.
When federal tax is combined with state and local taxes, government is claiming more than 40 percent of our income. Without entitlement reforms, it soon will be more than 50 percent. Do you think government should spend 50 percent of what we earn? Can you imagine what our country would be like?
You don’t have to imagine it. It’s happening right now, in Europe.
Most European countries collect taxes exceeding 50 percent of income. The results are more than 8 percent unemployment for more than three decades and government debt that soon will exceed 100 percent of those countries’ GDPs.
If you like where Europe is, you should vote for current U.S. policies. If you don’t, you should support what always has been the genius of America. Vote for policies that support our free-enterprise system, which has been embraced by Republicans and Democrats over centuries. Endorse policies that give all Americans the opportunity for a higher standard of living and the opportunity to be the best they can be.
Opportunity is not entitlement. Safety nets for those temporarily facing difficulties and for those who do not have the physical or mental capacity to care for themselves are an important part of America’s past. Wealth redistribution never has been and never should be part of America’s culture.
America thinks each generation should have a higher standard of living than the one before. We educate our children to be the best in the world, not No. 20 and getting worse.
Immigration is the foundation for America’s past and future prosperity. America welcomes immigrants, educates them and asks them to help us grow and prosper.
America should have low marginal tax rates, graduated by income levels with few deductions — in short, a simpler tax code in which everyone pays his fair share. We must make our entitlement programs sustainable by gradually increasing the retirement age and means-testing entitlements so they help only those who need it.
America’s founders toiled for years to bridge huge philosophical differences under economic and political conditions that make our current struggles seem petty. We need to elect leaders who will reach across the political aisle and do what’s necessary to make our nation’s future as grand and glorious as its past. We need to restore — not change — what makes America the greatest nation on earth.
William M. Isaac is former chairman of the Federal Deposit Insurance Corp. and chairman of Fifth Third Bancorp. Richard M. Kovacevich is retired CEO of Wells Fargo & Co.