We all know that our annual deficit — the spending of more than $1 trillion over tax revenues — and that our national debt of almost $16 trillion are unsustainable. But how did it get this bad, and more important, what are we going to do about it?
Well it didn’t all happen during President Obama’s three and half years, although he accelerated the crisis and has done nothing to stop the erosion of financial confidence in the United States. This has happened over the past 60 or more years, and following are some of the factors that collectively have set the stage.
Social Security was enacted had a very sound initial objective: to make it obligatory for wage earners to set aside a small percent of their earnings so that they would have some retirement money. Actually, the money set aside is to support those who have already retired and not for the individual worker’s own savings account. This set the stage for future expansive entitlements that are growing each year, notably Medicare and Medicaid.
Unions became very powerful, and with compliant management set up health and pension plans in private industry and at municipal and state governments that required increasing taxpayer support.
The number of federal agencies and departments has grown to meet ever-increasing de-mands for services, with the employees in many cases receiving salary and benefits that exceed those in private industry — to be paid by taxes.
Congress ventured into social engineering with red-lining and obligating banks to grant mortgages to people who were poor credit risks. This ended up in bank failure and the bailout of Fannie Mae, which led to TARP and billions of dollars down the drain
The United States entered into costly — and not paid for —wars in Iraq and Afghanistan.
The Obama administration has been spending hundreds of billions more in stimulus and green energy with little benefit when we should have been focusing on fossil fuels to further expand our economy and create jobs.
In the 1990s, the Internet ex-plosion took place, industry prospered, stock markets soared, people became richer, corporations were paying millions for their CEOs and everyone had to get the best of everything, including governments at all levels. Taxes went up and greed was pervasive. TV contracts brought millions and billions of dollars to sports and entertainment. Athletes, coaches and Hollywood set the salary and pay standard, and soon to follow were Wall Street, corporations, governments and even universities. Much of this was accomplished by paying human resource consulting groups to perform surveys to show how much more money the organization should be paying its staff and upper management. The result was a never-ending upward cycle, which in the case of governments is paid by the taxpayer.
Many people had to have bigger and more opulent homes, several cars, expensive vacations — a lot of living on credit. We thought it would go on indefinitely.
The net effect is that we, the American people, became comfortable and enamored with the cushy lifestyle. All of us, whether we earned it or not, felt we deserved a continuance of an unrealistic level of entitlement, which, when tax money is used, is unsupportable.
Media people have talked about the debt for years, Congress members talk about the issue, and President Obama even established the Simpson-Bowles Commission, but neither he nor has Congress acted on any of the commission’s recommendations.
It doesn’t take an economist to know we are heading over a financial cliff just like Greece, Portugal, Spain and other countries. What are we going to do about it?
At present the prevailing Democratic view has been to do nothing but tax the rich more. The prevailing Republican view is to reject higher taxes, to modify the tax rates and reduce regulations.
My view is that we have to do all the above. Let’s start with implementing Simpson-Bowles. Folks, everyone is going to have to share in this; there are no sacred cows. President Obama is a superb campaigner and speech reader, which he has been doing most of the past three and a half years. Unfor-tunately, he has shown little to no economic leadership and never produced a plan to meet the crisis. I will close with a baseball analogy. Barack Obama has been the starting pitcher; some may think he still has control and a game plan. But if not, maybe it is time for a relief pitcher with a good change of pace.
Arthur F. Loub. 1517 Williams-burg Dive, is president emeritus of the KSU Foundation.