Our federal government is now $16.5 trillion in debt and annual deficits are at the rate of over $1.2 trillion. The path to economic disaster is increasingly clearly marked. A large majority of Americans believe it is timely to put
Our federal government is now $16.5 trillion in debt and annual deficits are at the rate of over $1.2 trillion. The path to economic disaster is increasingly clearly marked. A large majority of Americans believe it is timely to put America’s fiscal house in order.
But a basic problem exists: The probabilities are huge that our elected leadership in Washington either can’t or won’t act to meaningfully rectify the position.
The likelihood for realistic action is clouded because the members of Congress in both parties seem more concerned about avoiding a position that might adversely affect their electability than serving the people they represent and our president, who a few years ago decried the Bush debt buildup as “irresponsible” and “unpatriotic,” now wants to maintain spending to pursue his agenda despite his administration having incurred more deficit in four years that Bush did in eight.
There are several occasions now or shortly being presented for the consideration of our fiscal responsibility, including the debt ceiling, the sequestration measure recently postponed for 60 days in the “fiscal cliff” settlement and a budget adoption. The president has already decried allowing the debt ceiling to disrupt federal spending such as those to Social Security beneficiaries and veterans. He is right that we should try to avoid legislated deadlines. Artificial limits ideally should not be used in connection with seeking solutions to long-term problems, but Congress has a sorry record of failing to act unless confronted with a deadline.
Here are some guidelines to consider relating to the position:
• Advocates of increasing the ceiling have argued that unless this action is promptly taken, the government will default on its indebtedness. Nonsense. Federal revenues are about $2.5 trillion each year and interest is only 8 percent of that. So long as interest is paid there will be no default. In fact, the government could in theory continue indefinitely to function if it spent no more than its revenue. In days of yore that was what was called a balanced budget.
• Rhetoric may be heard contending that the deficit problem was solved by the law enacted at the beginning of the year dealing with the fiscal cliff. But the facts are otherwise. The annual deficit is about $1.2 trillion. The fiscal cliff legislation raised revenues principally by increasing income taxes of those having more than $400,000 in income. The revenue increase amounted to about $60 billion per year. After giving effect to this increase, the deficit will be only $1.14 trillion per year.
• Deficits can be reduced by raising revenues or cutting spending or a combination of these two. In the “fiscal cliff” law rates were raised for higher income taxpayers and certain other tax matters were changed. Neither party has announced any intent to make further tax rate changes. It thus appears that any discussions on deficit decreases in the debt ceiling or the sequestration considerations will relate to spending reductions.
• Spending cuts were conspicuously missing from the presidential agenda announced in his second inaugural address. Does that mean he will block any real deficit reduction and his successor will inherit a $20+ trillion debt? We will see.
It is quite apparent that neither the Republicans nor the Democrats want to initiate the specific identification of any spending reductions. Even if a member of Congress wants spending reductions so that the deficit may be reduced, everyone seems to lack the courage to be specific. Similarly there is a disposition to favor discussing reductions as amounts to be saved over a 10 year period and avoiding any focus on the current effect or lack thereof.
There are obvious opportunities to accomplish savings in many government operations. But if major reductions in government expenditures are to occur it will be necessary to turn to the entitlement programs — Social Security, Medicare, Medicaid and veterans benefits. And the 400 pound gorilla is Social Security.
The Social Security program was created in the 1930s at a time when average life expectancy was little more than 60 years. It is now approaching 80. Currently there are less than two workers making contribution for every one receiving benefits. And contrary to the notion that benefits were somehow actuarially connected with contributions, the reality is that Congress over the years has bestowed benefits far greater than the contributions required. Some retired persons receive benefits more than ten times the tax costs paid. Social Security is a particularly good target for attention as it not only provides potentials for significant deficit reductions, the changes made might also assure future solvency of the program. The features of the program that could receive consideration include raising the age limit, providing means testing, adjusting the COLA as well as cutting benefits.
The beneficiaries of the government profligacy that has created the $16.5 trillion debt (more than 2/3 of it in the last 12 years) have largely been the current generation. If we are to protect our children against this staggering burden and the future deficits that are now projected, we need to make some fundamental changes and take some current sacrifices. If our governmental leaders fail to understand this reality we will shamefully impose on the future burdens that will endanger our societal survival.
• Walter Lewis is a resident of Princeville and writes a biweekly column for The Garden Island.
