Can We Fix Our National Debt?
Do We Really Have a Debt Problem? (April 2011)
America is heading in uncharted territory. Our level of spending would have been inconceivable only a few years ago. There are several reasons for the problem and no easy solutions. But if something is not done to balance the budget, the American way-of-life will change.
Many Americans who consider themselves well educated, are affected by the “normalcy bias”. If you are unfamiliar with the term, it occurs when someone fails to realize very unusual circumstances can lead to very unusual results. It is the belief a person has when they build their house in a 100 year flood plain. That person is “sure” their house won’t be washed away by flood since in their lifetime the property has never flooded. America’s economy is about to be washed away in a 300 year flood and hardly a soul is stacking sandbags.
How Did We Borrow So Much?
Our budget deficits have lead to unfathomable debt. Our debt is owed to Americans, foreign citizens, foreign banks, and foreign governments. We are paying the interest on that debt by simply printing money and sending much of it overseas. Our National Debt is a serious problem, compounded by enormous private debt.
How did America become a third-world debtor nation overnight? In this case, overnight can be traced all the way back to Roosevelt and the creation of Social Security. Not that the program is bad, but it has been poorly administered. It started as a penny tax on each dollar earned and only started to pay out when one attained 10 years of age beyond the national average lifespan. Not a lot of dollars were taken in, and even fewer dollars were spent for benefits. It is now, along with burden of Medicare and Medicaid, the largest governmental program ever conceived, dwarfing national defense and all other spending combined.
No Solution To The US Economy Can Exclude Entitlement Reform
Let me say that again, America cannot fix its economic problems without addressing Social Security, Medicare, and Medicaid costs. Newt Gingrich tried to make this point on the House floor about 15 years ago and it ruined his political career. Americans just didn’t want to hear it!
Politicians, being what they are, throw out sound bites, accuse each other, take opponents comments out of context, intentionally confuse the facts, and address trivial concerns, all in an effort to avoid facing the real problems of this nation. Who wants to listen to a politician espousing pending doom? To get elected in America, a politician must raise lots of money, advertise their vision of hope and wisdom, which may be completely and consciously false (aka lies), knowing if they can sell their optimistic views they will be elected by an under informed population. This formula for getting elected works especially well against an honest opponent. We get what we deserve.
We are exposed to distractions, often “leaked” by political operatives, of tax loopholes, unfair distribution of taxes, tax cheats, off-shore havens, and all other manner of tax avoidance or cons being responsible for our debt problems. They contribute, but just as the last brick put on the wagon breaks the axle, it is the last brick’s fault or the 10,000 bricks loaded earlier? GE’s use of the tax code to avoid paying any corporate tax on $5 or so billion in profits (they actually got a credit of $2 billion or so) is deplorable, but in comparison to the wagon-load of bricks it is only a chip off one of the bricks.
How To Inject Some Honesty in Politics
Americans need to be informed to vote intelligently. We cannot rely on politicians to provide accurate, undistorted facts. When we vote for or against a candidate and know nothing about their character, views, or past performance, we do irreparable harm to the nation and to democracy. When we base our votes on sound bites, we are worse than uninformed, we are also misled. We have the right to pursue happiness and to speak our piece. But with these rights go the responsibilities to not interfere with others’ happiness and to not slander or be offensive. Americans have the right to vote, and along with this right goes the responsibility to be informed.
If you want to see the American economy recover, we need politicians that will face the music, speak and act honestly, and make some very tough decisions to get us out of the mess we have made for ourselves. The real problem is mismanagement of government, a bloated pig that can’t even get out of its own way. Who’s really responsible for our government and its mismanagement? The temporary team we hire every few years, or the owners who hire them?
Top 10 problems we face today
Not necessarily in order of importance, our current woes can be attributed to the following issues that require attention and repair:
- National Debt and Budget Deficit
- Inflation and The Dollar's Value
- Housing Crisis
- Lack of a Manufacturing Base
- Entitlement Programs
- Health Care Cost
- Tax Code and Loopholes
- Honesty in Politics
We Need Politicians That Will Address The Problems
Americans need to get serious about our problems and quit getting distracted. We need to elect politicians who are willing to speak and act honestly. We need to face the music that America has been spending money it does not have. JFK famously said, “Ask not what your country can do for you, but what can you do for your country.” America needs to embrace this concept and take it to the polls. Why don’t we have honesty in politics? Maybe because we elect those that tell us what we want to hear, regardless of how plausible their statements may be. An honest politician has no chance against a sleazy “sound bite” master.
Jimmy Carter was elected on a platform which promised to lower taxes, reduce inflation, and provide national health care. By Carter's second year in office, inflation nearly breached the hyper-inflation threshold only seen in third world nations, he raised taxes, and we all know what happened to national health care. But the promises got him elected. How bright does one need to be to understand you cannot lower taxes, spend for nationalized health care, and reduce inflation simultaneously?
Newt Gingrich, in an attempt to save Medicare for future generations, announced a plan offering several optional government-sponsored plans to seniors, along with the option of keeping their existing plan. In 1995 he said, "
"What do you think the health care financing administration is? It's a centralized command bureaucracy. It's everything we're telling Boris Yeltsin to get rid of. Now we don't get rid of it in round one because we don't think that's politically smart and we don't think that's the right way to go through a transition. But we believe it's going to wither on the vine because we think people are going to voluntarily leave it. Voluntarily."
meaning the alternatives would be chosen for their superior benefits to seniors. Starting days later, the Democratic labor unions began running national television ads with the clip of House Speaker Gingrich saying “we believe [Medicare] is going to wither on the vine.” For the next 15 years his political career was over. Politicians, being the astute characters they are, have avoided the subject of entitlement reform until it has now bit us on the behind. More on this can be found on Zimbo, click the link.
How Much Tax Is Too Much?
Why Don't We Just Raise Taxes?
Can we tax ourselves out of debt? Not unless you want to live in a grass hut. Tripling taxes is not feasible. It would destroy the economy and create massive unemployment, and therefore reduce the net tax revenue of the government.
Currently, we have a 44% higher corporate tax rate than the OECD average. That's one reason our jobs move overseas. The top one percent of American individuals pay 40% of the Federal revenue. The top 10% pay 70% of revenue while the bottom 50% pay only 3% of all federal taxes. Who will pay the extra taxes? The bulk of the increase would need to come from average and lower-paid americans.We're stuck between the proverbial rock and a hard place. We can’t tax ourselves out of the massive debt, and no one wants to cut government spending.
Only a sensible, gradual, and sustainable attack on each of the problems above will put America on the right track. It may take 30 to 40 years to fix these problems. It took 30 to 40 years to get us here. That’s a life-time of slow growth and higher taxes. It is our cost for spending our kids’ money to live high on the hog. A sustained period of tough decisions will require strong political leaders with the courage to tell us like it is. Americans will need to reward honesty in politics by electing those with the courage to be truthful -- whether or not we want to hear it.