When Doing Nothing is Expensive

A must read: The Politics of Avoidance

America’s budget problem boils down to a simple question: How much will we let programs for the elderly displace other government functions — national defense, education, transportation and many others — and raise taxes to levels that would, almost certainly, reduce economic growth? What’s depressing is that this question has been obvious for decades but our political leaders have consistently evaded it. This includes and indicts Democrats, Republicans, conservatives, liberals and every president since Jimmy Carter, particularly Bill Clinton and George W. Bush, who clearly understood the problem.

Our political culture prefers delusion to candor. Liberals would solve the budget problem by taxing the rich and cutting defense. Think again. The richest 5 percent already pay about 45 percent of federal taxes; they may pay more but not enough to balance the budget. Defense spending constitutes a fifth of federal spending; projected deficits over the next decade are similar. We won’t shut the Pentagon. Republicans and tea partiers think that eliminating “wasteful spending” would allow more tax cuts. Dream on. The major spending programs, Social Security and Medicare, are wildly popular with roughly 50 million beneficiaries.

It’s worse than most people realize because the truth about Social Security’s liabilities has been hidden from the public by fancy economic babble like “the trust fund,” and 75 year windows. But in 2003, a small section in the Social SecurityTrustee’s Report Actuarial Estimates showed the program’s unfunded liability to be $10.5 trillion. In addition, every time Washington punts the ball, the problem becomes more expensive to fix. The American people can’t afford for Washington to continue to do nothing.

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2 Responses to When Doing Nothing is Expensive

  1. 71LesPaul says:

    Its a lack of leadership in Washington that continues to allow this problem to get punted into the future. And shame on all the Americans who would rather encumber their grandchildren with a mountain of debt than face the prospect of actually living within their means, because that might mean gasp! personal sacrifice. Its about the most unpatriotic thing members of the Government could conspire to do, knowingly sapping the future strength of the USA by piling on decades of debt payments. But if an American politican knows anything, its that you don’t mess with Social Security if you have any designs on being re-elected.

    I can see a strategy brewing to cover the social security shortage through higher death taxes. A “pay as you go” scheme so to speak. “Now my advice to those who die. Declare the pennies on your eyes.”

  2. Drae says:

    Increasing death taxes or any taxes won’t be enough. Cutting spending won’t be enough. It’s going to have to be both, much to everyone’s chagrin…

    This is why reforming the tax code is important. Payroll taxes won’t supply enough, because the number of workers supporting retirees will be decreasing. Meanwhile, life expectancy continues to go up, and retirees need to be supported longer, which is why the raised retirement age makes sense. But these measures still won’t be enough…

    There will be plenty more on this subject at OB&B.

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