The US Downgrade: Who is really to blame?

The recent credit downgrade by the S&P has created a whirlwind of finger pointing in Washington. Liberal Democrats blame the Tea Party for not allowing taxes to increase, while Conservative Republicans and members of the Tea Party blame the Democrats for out of control spending. But what really caused the downgrade? And who is to blame?

Just look in the mirror.

Since at least the time of the Great Depression, we, the US voters, have continued to vote for candidates who give handouts in exchange for votes. These handouts come in many forms, some more obvious than others. College students vote for those who would increase government subsidized loans and grants. Defense contractors vote for representatives who want greater military spending. Farmers and Ranchers vote for the candidates who would increase farm subsidies. And older voters vote for those who would increase Social Security and Medicare payouts.

We are all to blame.

To be sure, some of the subsidies and handouts from the federal government have made life in the United States a better place, and many in this country can’t imagine life without those programs. Having said that, we still need to pay for the programs that are in place. Unfortunately, the national debt is huge today because we have not provided the funding for the programs currently in place. Consider the following examples:

• Social Security started in 1935 and ran huge surpluses into the 1960’s. Almost from day one politicians from both sides of the isle handed out more and more benefits from the program. (Not surprisingly, benefit expansion bills always seemed to get signed into law just before an election.) In 2010, Social Security revenue equaled the benefit payout. In a few years, benefit payouts will be greater than revenue. This would not be a problem if we still had the 30+ years of surpluses, but they have all been spent to cover deficit spending.
• Farm subsidies are another program that dates back to the Depression era. While farm subsidies have never made economic sense and there have been many attempts to end the subsidies, farmers have always fought against a reduction in subsidies. Today, the farm subsidy program costs the country $30 billion each year.
• Medicare Part D was passed in 2002, with no provisions to pay for the program. Before passage, the average senior spent 3.2% of his/her budget on prescriptions, which is less than the average entertainment budget. However, senior citizens are a huge voting group, and there has been little appetite in Washington to reform the program. In 2010, the program cost the US Taxpayers $62 billion.

There seems to be a consensus among US citizens that our debt is out of control and we need to reign in the spending. Sadly, there is no consensus as to what programs to cut or eliminate. It seems we have a form of the”NIMBY” (Not In My BackYard) effect ….although in this case I would call it the “NMHO” (Not My HandOut) effect. Go ahead and cut spending on the programs that don’t benefit me, but don’t think of touching my program.

Our nation’s fiscal problems will not change until we change. People must once again embrace the idea of doing what is in the nation’s best interest, even if it is personally painful. Everyone will need to sacrifice. Those who are retired need to take less from the government and rely more on their own savings. College students need to pay for more of their education. And farmers may need to go without government subsidies.

We, as a nation, have caused this problem, and we, as a nation, must fix this problem. If we can’t come together, I see no way out of this debt crisis.

I hope you have enjoyed this article. Please feel free to leave comments below. Be sure to stop by my blog at TheThriftyNation.com for great money-saving advice!