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A deficit of realism

Sunday, June 20th, 2010



Americans lament budget deficits, but they always want the other guy to sacrifice to fix them. In the weekly Centre Square essay, Chris Satullo argues that fiscal shortfalls can be traced in part to shortage of realism by voters.

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We need to talk.

By we, I mean we American voters.

We have a problem. And we’re not dealing with it.

At all.

Here’s the problem: Our federal government spends way more money each year than it takes in. It finances the rest with Uncle Sam’s credit card.

Households that behave that way end up in bankruptcy court.

Nations that do this end up in like Greece, a basket case that is spooking the global economy.

The U.S. is about a decade of unreformed behavior away from being Greece. That’s the warning from a very smart guy David Walker, who used to run the Government Accountability Office, the nation’s chief fiscal watchdog.

He definitely thinks we need to talk.

Because this really isn’t, in the end, just the politicians’ fault. Or the banks’.

And it’s not “welfare” that’s driving America to the fiscal cliff.

No, it’s us, the middle class. Our cherished benefits – our mortgage deductions, health coverage subsidies, our Medicaid, Medicare, and Social Security – form the biggest, scariest chunk of unsustainable government spending. And the biggest obstacle to reform is our refusal to share the pain of reform, in taxes or reduced benefits.

Oh, we love to pretend differently. But, no matter how much we carp about waste, fraud and abuse, that unholy trinity plays only a supporting role in the drama.

We’re the lead actors.

Our reaction remains childish: We do want the government to stop spending it doesn’t have. We want it to do so by cutting only those benefits that we don’t receive and raising only those taxes that we don’t pay.

Doesn’t work. Never has. We must agree on the right mix of sacrifices, the right triumph of citizenship over selfishness. We talk this stuff through more honestly, self-excusing myths aside.

This week in Philadelphia, we’ll have a chance to do so. This coming Saturday, at the First District Plaza in West Philadelphia, an outfit called America Speaks is holding a day-long town meeting on America’s finances. It’s one of 19 nationwide. Results will be conveyed to the President and Congress.

If you’re ready to elbow aside childish myths, if you’re ready for honest, fact-based dialogue, sign up at www.usabudgetdiscussion.org. It’s not too late. But someday soon it will be.


10 Comments

  • Jeff Harding says:

    @ Kathy, at the local level the “day to day” operations are not where I believe the waste is coming from. I’m concerned with the patronage and other dealings the money is spent long before covering the “day to day” expense of providing the “needed services.”

    @ Paul via Ed, You write “Spend now, while the economy remains depressed; save later, once it has recovered. How hard is that to understand?” When does the spending ever end? And when was the last time the elected officials in government tried to save anything but their own jobs?

    On the military, maybe if we were not sticking our greedy little noses in the business of other countries they would not want to kill us.

  • Steve McCarter says:

    The need for this dialogue is long overdue. Whether this or any other forum will bring results is doubtful unless honest, caring and committed candidates for public office will stand up and profess that the need to raise revenue in a fair and equitable manner is not only needed, but fundamental in a democracy. Time is running out, not only on the our ability to sustain the basic fundamental services and support that society must jointly provide its’ citizenry, but on the dreams and aspirations of the millions of young people facing a dubious future. The common good calls for fairness that can only be achieved with a progressive income tax and not the nickel and dime approach to taxation through sin taxation. Individuals and businesses sharing the tax burden in a progressive mix is hardly new, but as we keep running away from that mix with cries of being overtaxed the problem worsens every hour.

    Now is the time for elected leaders and individuals to rise above the simple solution of postponing everything to another generation to deal with the problems we face today. Sacrifice shared, especially by those most able to pay, is the beginning of a solution. Is there anyone else out there to take up the call?

    • Kathy Black says:

      You’re so right, Steve. Locally, Stan Shapiro of Neighborhood Networks has been attempting to lead a charge on this topic for several years. He’s written extensively about it on local blogs, letters to editors, etc. He’s worked with other groups, like the Coalition for Essential Services, that try to apply these lessons to the City budget. There are progressive taxation organizations nationally too, but, for all the usual political and self-serving reasons, they don’t get a lot of traction. Crisis seems to be the only thing Americans respond to, and even then it’s not always a rational response.

      • Kathy Black says:

        Just got a message from Stan with an opportunity to speak out on this very issue. Read on…

        On Saturday, an organization called America Speaks will be having forums all across the US looking for opinions on what to do about budget deficits.
        Some of us don’t think budget deficits are the major problem facing us right now. Maybe we’d put unemployment first. Or education. Or housing. Or global warming. Or income inequality. Or immigration reform. Or we’d put all of them ahead of budget deficits.
        So because budget deficits aren’t our passion, we might decide it doesn’t matter what happens on Saturday.
        That would be a mistake.
        America Speaks is well funded by right wing foundations. It will do everything possible to tilt the “consensus” emerging from Saturday’s discussion to conform to conservative views of what to do about budgets and spending. That means without us, no one will be talking about priorities that require spending, no one will be defending social security and Medicare and Medicaid.
        And here’s what really hurts, when they say that these essential things must be cut — and war spending and tax cuts for the rich maintained — they will also say they are speaking for you.
        They will take that “consensus” to Congress, to the President’s own deficit commission, to the media echo chamber, and into the fall elections.
        So here’s what to do. Sign up to attend the event and have your actual voice heard. You can do that by going here.
        Or join a coalition of progressive groups, including Neighborhood Netowrks, that will gather outside the entrance to the event passing out information to participants as they go in. Our flyers will be suggesting ideas that folks might want to present to the forum that put people first. If you’d like to join us in spreading these ideas, just drop me a note at shapsj@comcast.net and I’ll send you all the details.

        But please, whatever you do, don’t stay silent.

        Thanks.

        Stan Shapiro

  • Stewart Palilonis says:

    Jeff is right. In the short run, and even more so in the long run, we have to make drastic cuts in the military budget, which constitutes half of the federal budget. Why we have nuclear submarines, ICBMs, a huge army, etc., is beyond me. All it leads to is military adventurism. The mentality is, “if we have all these weapons, we can and use them to promote national policy,” and ” we have to fight them over there so we don’t have to fight them here.” We have to fight them here anyway, so let’s concentrate on this country. I’m not an isolationist, but we have more than enough forces to defend ourselves against all existing threats. We’re going to spend ourselves into penury while basic services for citizens disappear.

  • Ed Schwartz says:

    Note:

    Paul Klugman’s column in today’s (Monday’s) New York Times addresses the critical question of when it is appropriate to put this problem on the front burner of America’s Agenda.

    Ed Schwartz
    Institute for the Study of Civic Values

    Paul Krugman

    Spend now, while the economy remains depressed; save later, once it has recovered. How hard is that to understand?

    Very hard, if the current state of political debate is any indication. All around the world, politicians seem determined to do the reverse. They’re eager to shortchange the economy when it needs help, even as they balk at dealing with long-run budget problems.

    But maybe a clear explanation of the issues can change some minds. So let’s talk about the long and the short of budget deficits. I’ll focus on the U.S. position, but a similar story can be told for other nations.

    At the moment, as you may have noticed, the U.S. government is running a large budget deficit. Much of this deficit, however, is the result of the ongoing economic crisis, which has depressed revenues and required extraordinary expenditures to rescue the financial system. As the crisis abates, things will improve. The Congressional Budget Office, in its analysis of President Obama’s budget proposals, predicts that economic recovery will reduce the annual budget deficit from about 10 percent of G.D.P. this year to about 4 percent of G.D.P. in 2014.

    Unfortunately, that’s not enough. Even if the government’s annual borrowing were to stabilize at 4 percent of G.D.P., its total debt would continue to grow faster than its revenues. Furthermore, the budget office predicts that after bottoming out in 2014, the deficit will start rising again, largely because of rising health care costs.

    So America has a long-run budget problem. Dealing with this problem will require, first and foremost, a real effort to bring health costs under control ­ without that, nothing will work. It will also require finding additional revenues and/or spending cuts. As an economic matter, this shouldn’t be hard ­ in particular, a modest value-added tax, say at a 5 percent rate, would go a long way toward closing the gap, while leaving overall U.S. taxes among the lowest in the advanced world.

    But if we need to raise taxes and cut spending eventually, shouldn’t we start now? No, we shouldn’t.

    Right now, we have a severely depressed economy ­ and that depressed economy is inflicting long-run damage. Every year that goes by with extremely high unemployment increases the chance that many of the long-term unemployed will never come back to the work force, and become a permanent underclass. Every year that there are five times as many people seeking work as there are job openings means that hundreds of thousands of Americans graduating from school are denied the chance to get started on their working lives. And with each passing month we drift closer to a Japanese-style deflationary trap.

    Penny-pinching at a time like this isn’t just cruel; it endangers the nation’s future. And it doesn’t even do much to reduce our future debt burden, because stinting on spending now threatens the economic recovery, and with it the hope for rising revenues.

    So now is not the time for fiscal austerity. How will we know when that time has come? The answer is that the budget deficit should become a priority when, and only when, the Federal Reserve has regained some traction over the economy, so that it can offset the negative effects of tax increases and spending cuts by reducing interest rates.

    Currently, the Fed can’t do that, because the interest rates it can control are near zero, and can’t go any lower. Eventually, however, as unemployment falls ­ probably when it goes below 7 percent or less ­ the Fed will want to raise rates to head off possible inflation. At that point we can make a deal: the government starts cutting back, and the Fed holds off on rate hikes so that these cutbacks don’t tip the economy back into a slump.

    But the time for such a deal is a long way off ­ probably two years or more. The responsible thing, then, is to spend now, while planning to save later.

    As I said, many politicians seem determined to do the reverse. Many members of Congress, in particular, oppose aid to the long-term unemployed, let alone to hard-pressed state and local governments, on the grounds that we can’t afford it. In so doing, they are undermining spending at a time when we really need it, and endangering the recovery. Yet efforts to control health costs were met with cries of “death panels.”

    And some of the most vocal deficit scolds in Congress are working hard to reduce taxes for the handful of lucky Americans who are heirs to multimillion-dollar estates. This would do nothing for the economy now, but it would reduce revenues by billions of dollars a year, permanently.

    But some politicians must be sincere about being fiscally responsible. And to them I say, please get your timing right. Yes, we need to fix our long-run budget problems ­ but not by refusing to help our economy in its hour of need.

  • Kathy Black says:

    I see a couple articulate listeners already weighed in with some of the points I was going to make. I agree with everything Carl wrote, and much of what Jeff wrote.

    The main point I wanted to make was also the colossal waste associated with war and occupation, and the military generally. We now spend more than 50% of our national funds on the military, and we are losing both wars we’re in, not to mention the lives of our brave troops, and those of the hundreds of thousands of innocent civilians in Iraq, Afghanistan and Pakistan. And then there’s our international reputation and hope for brokering a more peaceful world. There was a little promise of that when our Muslim-named President was elected and reached out, but he seems to have squandered that with his futile escalation of the war in Afghanistan. That’s where all the money is, and the fraud and corruption – not in our safety net for our own citizens, which is paltry compared to any other industrialized nation in the world. Don’t get me started on the cost (and lack of accountability) of contractors…

    As someone who works daily with City government, however, I do take issue with Jeff’s assumption that if you cut out the waste and corruption you can fund everything. There certainly are some glaring examples of waste (the row offices, for instance)and corruption. But I don’t believe fixing all of that (unlikely anyway) would provide enough to fill the gaps in needed services. City workers can’t purchase paper clips right now; many of them sit on broken chairs and barely have the basic office supplies they need to do their work. There are no frills, and no waste in most day to day operations. Many City buildings are in desperate need of repairs, not to mention basics like a fresh coat of paint. Check out some of the City’s Rec and Health Centers and tell me what waste you see.

    The longstanding hiring freeze coupled with the recession and the accompanying heightened need for services, means everyone is doing more with less. And they’re paying more. They haven’t had a raise in years. Many are paying more for health care. Because the City has screwed up in a gargantuan way over the years, their pensions might not even be secure.

    Carl is exactly right. We need increased aid to state and local governments, public school systems, and infrastructure support. We need a steady pipeline of money into job-creating projects.

    Then, when we have stimulated the economy sufficiently that it can grow again, we can start paying back China and erase our deficit, as we did in the 90s. But we’ll never be able to do any of that as long as we send half of our hard-earned dollars overseas in immoral, unnecessary and futile wars.

  • Jeff Harding says:

    This editorial by Chris Sutollo and the reply by Carl Peridier are exactly why I rarely listen and no longer support WHYY. Niether of them have a clue. Yes, we need to stop spending (sorry Carl) but you have failed to mention the number one waste (and there are many) in governement, the military. The rich have been and will always get richer on the blood of our children. If you think we are at war for anything but pure greed please think again. The programs you mention are a drop in the bucket.

    As a side rant on waste and government, I’m so tired of the “lack of funds” for schools, community pools, rec centers, libraries, etc. being thrown in our face by poloticians and the media. There is so much waste and corruption in our government that they should “NEVER” be allowed to hold the people hostage by threatening to close these social necessities. There are plenty of places the money for these programs could be found by cutting the waste and theft that now exists.

    Rant over.

  • Carl Peridier says:

    Why is Chris Sutullo talking about the federal government spending and debt right now? Of course what he says makes sense in the long run, but we’re still in the middle of trying to dig ourselves out of a very bad recession and it’s not the time to cut back on spending. Ending government relief money too early is what made the Great Depression much worse.

    I sure hope we don’t let our fragile economic recovery falter by cutting back on stimulus money, especially to hard hit state and local governments which are facing draconian budget scenarios. Let’s not succumb to the deficit hawks. They never tried to balance the budget while our economy was doing fine, which has now gotten us into this economic disaster.

    Now is not the time to listen to those who want to frighten us by demonizing stimulus money and federal assistance. Given our high unemployment rate, letting states and local governments go through massive layoffs of teachers, police officers and firefighters is totally irresponsible. Not only will this potentially put us back into a recession, it will damage our country in the long term by forcing a layoff of 100,000 to 300,000 public school jobs. This threatens the future for our pupils, who already suffer from a poor educational system. Our economy depends on having well educated workers.

    We need to continue unemployment funding and fiscal aid to states until we can safely slow down our stimulus spending.

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