U.S. government must balance its budget
(This is a blog entry for U.S. citizens — everyone else can ignore it.)
We Americans must demand that the U.S. government work to balance its budget over time. The U.S. government has a massive annual deficit, resulting in a massive national debt that is growing beyond all reasonable bounds. For example, in just Fiscal Year (FY) 2010, about $3.4 trillion was spent, but only $2.1 trillion was received; that means that the U.S. government spent more than a trillion dollars more than it received. Every year that the government spends more than it receives it adds to the gross federal debt, which is now more than $13.6 trillion.
This is unsustainable. The fact that this is unsustainable is certainly not news. The U.S. Financial Condition and Fiscal Future Briefing (GAO, 2008) says, bluntly, that the “Current Fiscal Policy Is Unsustainable”. “The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform” similarly says “Our nation is on an unsustainable fiscal path”. Many others have said the same. But even though it’s not news, it needs to be yelled from the rooftops.
The fundamental problem is that too many Americans — aka “we the people” — have not (so far) been willing to face this unpleasant fact. Fareed Zakaria nicely put this in February 21, 2010: “ … in one sense, Washington is delivering to the American people exactly what they seem to want. In poll after poll, we find that the public is generally opposed to any new taxes, but we also discover that the public will immediately punish anyone who proposes spending cuts in any middle class program which are the ones where the money is in the federal budget. Now, there is only one way to square this circle short of magic, and that is to borrow money, and that is what we have done for decades now at the local, state and federal level … The lesson of the polls in the recent elections is that politicians will succeed if they pander to this public schizophrenia. So, the next time you accuse Washington of being irresponsible, save some of that blame for yourself and your friends”.
But Americans must face the fact that we must balance the budget. And we must face it now. We must balance the budget the same way families balance their budgets — the government must raise income (taxes), lower expenditures (government spending), or both. Growth over time will not fix the problem.
How we rellocate income and outgo so that they match needs to be a political process. Working out compromises is what the political process is supposed to be all about; nobody gets everything they want, but eventually some sort of rough set of priorities must be worked out for the resources available. Compromise is not a dirty word to describe the job of politics; it is the job. In reality, I think we will need to both raise revenue and decrease spending. I think we must raise taxes to some small degree, but we can’t raise taxes on the lower or middle class much; they don’t have the money. Also, we will not be able to solve this by taxing the rich out of the country. Which means that we must cut spending somehow. Just cutting defense spending won’t work; defense is only 20% of the entire budget. In contrast, the so-called entitlements — mainly medicare, medicaid, and social security — are 43% of the government costs and rapidly growing in cost. I think we are going to have to lower entitlement spending; that is undesirable, but we can’t keep providing services we can’t pay for. The alternative is to dramatically increase taxes to pay for them, and I do not think that will work. Raising the age before Social Security benefits can normally be received is to me an obvious baby step, but again, that alone will not solve the problem. It’s clearly possible to hammer out approaches to make this work, as long as the various camps are willing to work out a compromise.
To get there, we need to specify and plan out the maximum debt that the U.S. will incur in each year, decreasing that each year (say, over a 10-year period). Then Congress (and the President) will need to work out, each year, how to meet that requirement. It doesn’t need to be any of the plans that have been put forward so far; there are lots of ways to do this. But unless we agree that we must live within our means, we will not be able to make the decisions necessary to do so. The U.S. is not a Greece, at least not now, but we must make decisions soon to prevent bad results. I am posting this on Independence Day; Americans have been willing to undergo lots of suffering to gain control over their destinies, and I think they are still able to do so today.
In the short term (say a year), I suspect we will need to focus on short-term recovery rather than balancing the budget. And we must not default. But we must set the plans in motion to stop the runaway deficit, and get that budget balanced. The only way to get there is for the citizenry to demand it stop, before far worse things happen.
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