Solving the US Debt Crisis

The US debt crisis has not been solved. The only thing accomplished in the US after weeks of wrangling is an increase in the debt limit. In my opinion both the Democrats and the Republicans are correct - in part. The government needs to cut spending, AND the government needs to increase tax revenues. So here is what I suggest.

First - as we have been advocating here for years - put an import duty on all Chinese made goods. As almost everything is made in China - including your iPhone and computer - imagine the amount of money that will bring in to reduce the national debt. By increasing the cost of Chinese goods, something the Chinese have refused to do, this might also bring more jobs back to America.

Second, impose a two-percent Federal Sales Tax on consumer goods much like the V-A-T in Europe and the H-S-T in Canada. In Canada those with low incomes get a rebate check twice a year to make up for the cost of this tax, so this largely taxes the middle class and the rich.

Why do I recommend these forms of taxes rather than hikes in income taxes? Because these are CONSUMPTION taxes. Meaning they do NOT punish you for working and earning more. They do not remove the entrepreneurial spirit that societies want to foster. They only tax you when you make a discretionary purchase of a new TV or car or jewelry. So the consumer decides if that new TV is necessary and affordable.

While no one, including me, likes taxes of any kind, at some point the US will have to pull itself out of its economic chasm, or fall further into it. We have all learned that you really don't own your home if it is mortgaged beyond its value and by analogy you really don't own your country if it is indebted beyond its ability to pay. Taxes, like government, are not popular. But like government, they are necessary.