“Every single time it gets harder. Money, money, money, money, money! We can't keep doing this, Bob! We appreciate what you did in the old days, but those days are over.”
—Bud Luckey as the voice of Rick Dicker in The Incredibles
OK, so the unconstitutional “debt supercommittee” failed to come up with the required $1.2 trillion in deficit reduction by its self-imposed November 21 deadline.
The only thing shocking here is that anyone thinks that that failure matters much, other than giving Obama and the Democrats precisely the political ammo they wanted heading into the 2012 election cycle. The truth is, as I previously posted here, even had the supercommittee managed to find some combination of cuts and revenue to trim the target amount, spread over 10 years it wasn’t going to make a material difference in light of a budget that is projected to amount to some $44 trillion over that time. $44 trillion, $42.8 trillion: I don't see a real distinction there.
Let me point out what even Republicans in the District can’t bring themselves to acknowledge at any serious level:
We spend too damn much money. Period.
You can talk all you want about “fair shares” and increasing revenues by taxing the rich. The simple fact is that we have become totally—and perhaps hopelessly—addicted to borrowing and spending money WE. DO. NOT. HAVE. One need only look to Europe to see where this ultimately leads, as after 100 years of profligate borrowing/spending on a massive infrastructure of social programs and government freebies, the tab is now coming due. Given that our “enlightened” friends across the pond are now even taking official positions like “water doesn't hydrate,” I think we have to accept the fact that they are simply too far gone now to be saved. And if we don’t get our fiscal house in order, we are not long for the same fate.
If you don’t believe me—and if you can stomach it—check out the national debt clock. As I type this, the total national debt stands at north of $15 trillion (you can add to that another $3 trillion or so in state and local debt), and it is increasing at a pace of about $25,000 a second. But let’s consider some details behind that gross figure.
The total U.S. National Debt stands at $133,606 per taxpayer, and $48,088 per citizen. It is now more than 100% of GDP—that’s approaching Greece territory (120%), friends—meaning the federal government alone owes more than we as a nation produce. Combined annual federal, state, and local spending is 46.55% of GDP, which means that nearly half of what we produce each year is consumed by government. With total annual revenues at only 30.88% of GDP, you can see that at all levels, government is spending half again as much as it takes in.
We have to add to this spending the growing unfunded liability obligations associated with our massive entitlement edifice. These are the future commitments to pay benefits under the Social Security, Medicare, and prescription drug (Medicare part D) programs over and above the projected revenue for those programs. At present, those commitments total $116.5 TRILLION, or $1,035,246 per taxpayer.
The unavoidable truth is we have made promises to ourselves that we simply cannot afford to keep. And the problem isn’t just government spending. As individuals we are also living way beyond our means. Consider that total personal debt—mortgages, credit cards, and personal loans—in the U.S. stands at $15.9 trillion. That’s $51,168 per person, which becomes a serious problem when we realize that the median U.S. income per household is just under $50,000 a year. Even if government didn’t take and spend a dime, on average we owe more than we make.
When you combine government and personal spending, the total U.S. debt approaches $54.5 trillion, or a staggering $660,503 per family. Sooner or later, all that debt will come due—I’ve preached it before, and it’s one of those things that’s easy to forget: borrowed money has to be paid back.
This is a situation that requires drastic changes in our lifestyle. I can’t speak to personal spending habits other than we all need to reconsider whether we really need a flatscreen TV in every room and a new car every 3 years. But at the government level it requires serious cuts at levels exponentially higher than those the supercommittee was charged with making. Real reform is going to be painful, and it’s not politically expedient, but someone has to have the courage to hold our collective nose and make us take our medicine. Let me offer a couple of suggestions.
1. Phase out Social Security
While I’d like to say simply cancel it, you can’t tell someone already living on the system or someone who is close to retirement and who has planned all their life to be able to depend on social security: too bad for you. It has to be phased out over time, and yes, that means that there are going to have to be some of us who pay into the system who will get little or none of that money back. But given enough time, you can and should plan for that. I propose that we first begin ratcheting back the eligibility age; starting with those born in 1951 eligibility is raised to 66, then raise it every couple of years until beginning with those born in 1960 the eligibility age is 70.
Second, beginning with those born in 1961, we progressively reduce the benefits levels they will ultimately receive—say, 5 percentage points a year—such that those born in 1980 or later will receive 0 benefits, meaning by 2050 there will be no new recipients. As a tradeoff for that, those born in 1980 or later would only contribute at 30% of the current rate. For those born earlier, contribution percentages would reduce over time; the idea is that those who expect to draw more from the system would contribute more into the system. Everyone is going to take something of a haircut, but it’s the most equitable way to eliminate the problem.
2. Cut the government
I would also suggest DRAMATIC cuts to the government itself. Consider the following:
- Cut by 75% International programs (read: foreign aid) and the departments of Labor, Housing and Urban Development, Agriculture, Energy, Education, Health and Human Services, and EPA. This results in savings of approximately $412 billion.
- Cut by 33% the budgets for Defense, Medicare, and Medicaid. This results in savings of approximately $534 billion. For those of you concerned about Defense cuts, this would still leave a budget of just under $500 billion, which would still be about the same as the annual defense budgets for the rest of the world's top ten military spenders—including China—combined.
- Eliminate 100% of the waste identified by the CBO, and the stupid pork spending about which I have previously posted. This results in an additional $130 billion in savings.
- Reduce the remaining budget by 15% across the board. This saves another $165 billion.
These cuts reduce federal spending by approximately $1.25 trillion per year, not over 10. The resulting remaining federal budget is about $2.15 trillion, which is nearly $150 billion less than current annual revenues. Apply half that difference to paying down the debt, and the debt is eliminated in roughly 20 years. Return the rest to the taxpayers.
Just a suggestion.
Happy Thanksgiving, everybody!