Since I never want to offend anyone in the blogosphere, I decided to write about an uncontroversial, unemotional topic: the federal deficit.
Let’s begin with the fact that our country’s budget deficit can’t go on forever, and therefore won’t. The Congressional Budget Office projects that our ongoing annual deficit—excluding debt service—will be 6% of GDP. If you include interest payments, Treasury debt projections look like a hockey stick about to bang us on the head. And those figures don’t even include the ever-escalating costs for Medicare and Medicaid. In sum, although the U.S.—the world’s largest economy, fourth largest petroleum producer, issuer of the world’s reserve currency, and sole geopolitical hegemon—isn’t about to face a debt crisis like Greece, the downward slope to a currency crisis appears to be well greased.
In a recently issued study, the International Monetary Fund, whose job has been to clean up fiscal messes around the world, found that countries usually escape from debt traps by spending less and taxing more. Unfortunately, experience has already proven that neither greater spending nor lower taxation will stimulate enough growth to painlessly solve our current economic problems. So, it’s time for us as a country to forget about campaign promises and to start making tough decisions. The problem isn’t just about bad guys making poor decisions, whether they be public employee unions or Wall Street fat cats; rather, it’s about the benefits and subsidies we all currently take advantage of.
For me, there is federally subsidized flood insurance, without which I couldn’t even give away my house, which is located on a New Jersey flood plain. Continue with the vast public water supply systems needed to grow rice in the California desert. And don’t forget our vast military procurement programs which, in many cases, appear to have been created more to artificially support jobs in key congressional districts than to contribute to our national defense. Then, there’s the maze of tax benefits that distort the natural flow of capital. (If there’s someone I haven’t annoyed yet, write back and I’ll add to my list!) Of course, a reasonable argument can be made for every one of these budget bloaters, but the numbers dictate that many government programs will simply have to go. As Representative Paul Ryan’s recently submitted sweeping budget proposal makes clear, the Constitution’s mandate to “promote the general welfare” is about to be redefined.
It’s imperative that we initiate a package of spending cuts and tax hikes that will reduce our national debt while minimizing any short-term economic pain. Other less fortunate countries have done it—not without pain – and now it’s time for us to do so as well.