The Budget Battle, Can America Survive?

The dismal science (economics) is not my strong suit. Listening to the news recently, and reading newspapers has left me with a gigantic headache. Debt, deficit, 46 billion now, 75 billion later, interest on the debt, costs, and debt limit, are terms being thrown around in the current Congressional debate about how to get us out of this impending catastrophe. I did find something this morning, however,  which helped to clarify this mess we are in, and it needs to be shared with all of us.

It was written by David Malpass--a much smarter person than I--who presents some of these incomprehensible facts in a way that even I  became frightened because of where we are headed. His insight is in an editorial in today's Wall Street Journal, and is entitled, "After Obama's Budget, Republicans Need a New Strategy." After reading the article, the title is correct, because it is obvious that someone needs a strategy--new or otherwise even if we are forced to hear the truth.

Mr. Malpass (a deputy assistant Treasury assistant secretary in the Regan administration) reports that the federal government is "spending $300 billion every month...and of that $120 billion is borrowed." How's that for responsible management? He goes on to reveal ever more frightening figures:

Our debt limit is currently $14.3 trillion and will have to grow to over $26 trillion over 10 years as the government spends $46 billion and takes in $39 billion in taxes.  I can't believe it. He goes on to talk about the unrealistic assumptions that Obama's numbers are based upon.

His budget assumes that "real growth will climb from an already wishful 4% in 2012 to 4.5% in 2013, and 4.2% in 2014--despite plans for sweeping  tax increases." His wish-list also assumes that the Federal Reserve will keep interest rates low; wages and salaries will grow 6.6% per year in 2013 and 2014, and inflation will be only around 2%. Obama projects unemployment to remain about 6%-8% during this period. Mr. Malpass astutely points out that all these fanciful dreams will occur in an environment with "no recessions, no inflation, big tax increases, and no wars."

He reveals our violation of generational responsibility by relating that "there is talk that Washington wants to begin issuing 100 year bonds--the government gets the money now by promising that our great-great-grandchildren will pay it back." How's that for inter-generational Justice. Is anyone listening?

If we don't face up to this challenge, it seems certain that we will be in for an economic tragedy, and I'm not certain that we have the national will to avert this disaster. Let's face it, we are a 220 year old experiment. Can a government continue to thrive if encourages citizens to elect leaders based on how much treasure they promise to spend on them?  No one is even touching the biggest chunks of this budget crisis--Medicare, Medicaid and Social Security--at this point because maybe we won't vote for them next time around if they do. Do I see a fundamental flaw here?

On top of all this, it seems to me that no one believes that this is a real problem with real money. On an individual level each of us tries to manage our money carefully-- it is clearly ours, and we know it. If we're irresponsible, we feel the pain. On a national level, it's  no one's money because it belongs to everyone else. There seems to be a mind-set here of detachment from the consequences. Could anything be more potentially dangerous?

When the President's Debt Commission released it's report in December 2010, the public's reaction was appalling: Don't touch my benefits! It's apparent that we need leadership, and so far I haven't seen any. Republican's now have the opportunity to be leaders. Will they take the "chance" of telling the truth and risking their position of power in the next Congress. Let's hope so.