Today, April 17, 2011, the US national debt clock showed $14,281,988,839,404.12 in public debt. This means that with an estimated population of 310,403,719, each citizen’s share is $46,011.01. Furthermore, at the current spending rate, the debt ceiling will have to be raised by mid-May to prevent government default in early July. National debt is not good for our country, our economy and our national security. More debt can lead to staggering interest rates, send our economy down south and empower China. In the words of President Barack Obama in 2006: “Increasing America’s debt weakens us domestically and internationally”. Democrats and Republicans alike are both in agreement that something must be done to curb it. Yet, they talk the talk, but don’t walk the walk.
Chairman of the House Budget Committee Paul Ryan was perhaps the first one that took action. He saw the threat and decided to forgo on his political wellbeing and save our country from peril. He understood the political liabilities his plans will cost him, but understood that the nation’s liabilities will cost us much more. He released his plan, hailed by many non-partisans, to curb the national debt.
The first thing an accountant learns is that assets equal liabilities plus owner’s equity. The key issue for a business person is to stay out of the red. The basic thing that any person knows is that he must have a balanced budget. Yet, the main factor for a politician is to protect the status quo; to stick his head in the sand and protect unsustainable programs. To stay away from political toxic entitlement programs which pile up debt. Bureaucracies, once created, never die; bureaucrats simply create more bureaucracies to protect failing bureaucracies.
Rep. Ryan went against the common knowledge among politicians. He decided to place a stumble block in the way of his political career to remove the debt problem. He courageously authored a master budget which would protect the unsustainable programs without creating more bureaucracies, and without sacrificing the economic growth. Yet, the President knew better. He played by his political playbook and went on the attack. In a much hyped speech, he spoke little substance as he sharpened his partisan, rhetoric attacks. He painted the GOP plan as radical and warned the seniors that they will be thrown overboard with this plan.
President Obama made a short introductory statement hailing free enterprise before underlining the importance of government programs. We are a better country because of Medicaid, unemployment insurance, Medicare and Social Security, he claimed. Thus he said, that the wealthy “can afford to give a bit more back.” These programs he said were just creating “a little credit card debt” that won’t hurt. He blamed the current debt levels on President Bush’s policies and the war on terror while failing to mention that he tripled it since.
He forgot to reveal that Ryan’s plan to simplify the tax code and create “tax breaks for the wealthy” was initially supported by himself. In his first debate with Senator McCain, then-Senator Barack Obama agreed that our taxes are way too high and proposed reducing them by closing the loopholes in the tax codes. The loopholes that have Fortune 500 companies pay no taxes at all. Under Ryan’s plan, the tax decreases that will make businesses keep the money to grow a faster economy will be paid by closing these loopholes initiated by President Obama.
The President berated the “privatization of Medicare” and warned the seniors that they will have to pay more. He failed to indicate that under Ryan’s plan, only the wealthy will have to pay from their own pocket. These people who “can afford to give a bit more back” will simply take less. He didn’t care to state the fact that this plan will curb health insurance costs – something that his Affordable Care Act didn’t do.
His plan was simply raising taxes and playing partisanship. He decided to camp on rhetoric and thought that the Americans are stupid. He knew that he didn’t have any sound plans. He understands that Ryan has the “Roadmap to America” and “The Path to Prosperity,” but figured that he, nevertheless, will use the roadmap and path to reelection instead.
He knows that raising taxes is not the solution to the problem. Raising taxes may be necessary as a last resort but shouldn’t serve as the plan to more spending. An accountant won’t simply demand the entrepreneur to place more capital in his business to balance the books; he’ll cut expenses. A businessman won’t just look for more investors to get him out of the red; he’ll slash spending and eliminate waste. A household will tighten their belts to pay their bills and buy less. We should not send more businesses and jobs overseas because of Washington’s spending habits.
The Republicans and Paul Ryan understand that many Americans are dependent on the Government. They know that it is too late to stop these programs that assist the poor. Yet, they know that rhetoric and playing political safe games won’t save it. They understand that the status quo won’t maintain those unsustainable programs. Freezing level won’t do anything to stop this overspending. They must take a hatchet and cut. They must make reforms and changes now before it’s too late and those dependent on programs will die in the streets because of its sudden end. Washington must recognize that these programs that make up two-thirds of our budget and are unsustainable, and must stop playing politics on our account. President Obama ought to stop playing politics and ensure that the programs are sustained without affecting the economic growth of our economy.
Dave Hirsch is a political analyst and columnist. He can be reached at[email protected]
NOTE: The views expressed here are those of the authors and do not necessarily represent or reflect the views of YWN.
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Here is a very good proposal to help reduce corporate taxes while not adding to the deficit, I have never heard anyone propose this, so this is my own theory (as far as I know), end the allowance of tax deduction on corporate debt. It will not only raise revenue, but it will encourage companies not to take on too much debt. If they have to issue money they will issue equity instead, which might dilute shareholders, but it does not force them to go bankrupt. It would also create more demand for corporate bonds and treasuries and would drive yields lower, which would help (hopefully) us lower our debt. Any savings we have from this we can use to lower the corporate tax rate. Therefore, everyone should really be in favor of this except for the banks and the investment banks which underwrite the debt (although they also underwrite equity so they might not be opposed).
At the risk of repeating myself, I will start off by saying that this op-ed piece is so wrong in so many ways, I don’t know where to begin. So forgive me if I begin at the end, by repeating myself: the italicized paragraph at the end is either a non-sequitur or the inartful way that the YWN editors tell us that this piece is written by one “Dave Hirsch,” who is described as a “political analyst.” He is not described as having any financial, economic or budgetary expertise, but anyone who reaches the italicized paragraph and does have some knowledge of those matters will know that.
Most uninformed discussions of the US government’s debt, including the one in this article, start off by exclaiming that the debt is, holy schamoly, wowwie zowwie, yikey schnikies, OMG really really really really really really big. But they don’t say big compared to what. They don’t know how to put the US government’s debt into perspective. Economists and financiers would ask about the size of the US economy, the present state of the US economy, prospects for future economic growth, current tax levels and many other things (I’m not an economist or financier, so the foregoing list is not exhaustive) before declaring it “big.” If the US government debt does present a long-term problem – which it might, if it is not properly managed over the long term – then it must be addressed with long-term solutions, not scary exclamations like “your family’s share is $________________.”
There actually is (or used to be) a “national debt clock,” visible on 6th Avenue and 42nd Street in New York City, and it has been (or was) there for more than 30 years, and it has been scary for more than 30 years. It was digital, and you could see the numbers going up, flickering faster than a gas pump. It was operated by a private individual or group, and I presume (perhaps unwisely) that it was adjusted periodically to keep pace with actual US government indebtedness. It was so scary 30 years ago that, in a weak and stupid moment 30 years ago, I thought, “Golly, America will be up the creek in just 3 – 5 years.” And here it is, 30 years later, with the same silly “clock” scaring the simple folks like Dave Hirsch into thinking that the sky is falling.
Nobody objected to the debt when our previous president and his boss, Dick Cheney, went to war (or should I say, went to 2 wars) in the Middle East early in the current century and declared that the budget deficit – and by implication, the debt that makes a deficit possible – “doesn’t matter.” No need for tax increases, not need to cancel tax cuts, no need to tell Grandma to buy her own health insurance or tell Alaskans to build their bridge to nowhere with their own money. So in 2008, when the US financial markets froze up, and some major US financial institutions were on the brink of collapse (some were on the far side of the “brink”), and the US economy went into sharp recession, and the US government needed to straighten out the mess made by some well-paid (perhaps over-paid) bankers with some government money (which is way more delicious than government cheese), the US government was already deeply in debt. Since then, a stagnant economy, made worse by a too-small economic stimulus that was too small because of the misguided ideology of Mr. Cheney’s political supporters, has accelerated the growth of US government debt.
So now, with Republicans are pretending to be seriously concerned about the debt that has been accumulating since President Roosevelt first tricked the people into authorizing the federal government to borrow money. Republicans have demonstrated very clearly that they don’t like US government debt unless is is rung up under their administrations.
As for the “political courage” of Congressman Paul Ryan that Mr. Hirsch touts in this article, that is surely laughable. Mr. Ryan comes from a district that believes his ideology, and far from jeopardizing his political future, his plan has strengthened it. One would expect a “political analyst” to correctly analyze the politics of Mr. Ryan’s plan, but Mr. Hirsch has gotten that wrong.
As for Mr. Ryan’s plan, many financial, budgetary and economic experts think it is fundamentally unsound, based upon erroneous and indefensible – if not laughable – assumptions about economic conditions.
Mr. Hirsch’s third paragraph is a bundle of non-sequiturs, most of them cliches and many of them just plain false or irrelevant. Read it and laugh. Here is a sample: “The basic thing that any person knows is that he must have a balanced budget. Yet, the main factor for a politician is to protect the status quo; to stick his head in the sand and protect unsustainable programs.”
What’s wrong with this bundle of nonsense? For starters, Mr. Hirsch does not recognize the difference between the microeconomic parameters of an indivisual and the macroeconomic realities of being the most powerful country in the world. The US government can have an unbalanced budget from time to time – as we have for many years, as we will for many more – but the US government can manage the problem with sound policies, none of which are contained in the Ryan plan. The US government had a budgetary surplus as recently as fiscal 2000, the result of wise tax policies under – gaaagh – Democratic President Bill Clinton. We can do it again, but not if we are gawking at the “national debt clock” and thinking, “I haven’t got my share of it, we got to kill this now.” But Mr. Hirsch thinks the US government must balance its budget the same way he and I must balance ours, in the same time frame, by the same methods.
Mr. Hirsch also tells us that politicians must be treacherous and irresponsible – stick there heads somewhere. Does Mr. Hirsch hate America? Hate freedom? Hate democracy? I don’t think so, but he does not understand that not all politicians are as treacherous as he postulates, and he does not understand who the responsible politicians are.
Well, there are ten paragraphs in Mr. Hirsch’s screed, and I’ve barely scratched the surface of it. As I said when I started – so much falsehood, so little time – or something like that.
The Ryan plan makes completely unrealistic assumptions regarding economic growth.
The Ryan plan also makes completely unrealistic assumptions about what it will be able to accomplish in terms of Medicare cuts. The $15k voucher will be about a 25% cut in medicare expenditures. Except that since these will be private insurers with a minimum of five times the administrative overhead of Medicare, it really is about a 33% cut. Further, the $15k is not indexed to health care inflation, which has been running 7% annually, but to the overall CPI, which hasn’t been increasing much. So within a few years we are talking about a 50% cut. Furthermore, the private insurers can decide what people to let die, er, uh, what conditions not to cover. God help anyone on kidney dialysis, except that Congress will respond to the screams, double the voucher amount, and enact legislation to require coverage of all these expensive conditions. As a result, all the savings vanish and now you also have to pay for all the administrative overhead, seven figure executive compensation, and shareholder profits of the private insurers. If you don’t believe me, look at what has happened to the reduction in reimbursement to providers that was enacted under Clinton: The much smaller amount of pressure from physicians has prevented it from ever taking effect.
Why anyone would want to replace the most popular and efficient health insurer in America with private insurers, the best of whom have five times the administrative overhead, is beyond me — unless your real goal is to create a corporate welfare program. Given that Ryan voted for the Bush prescription drug plan (which wasn’t even funded), I suspect that is the case.
I have not read either plan in full but my colleague who happens to be Black and voted for Obama told me he likes Ryan’s plan better, not because it is necessarily perfect, but because Obama’s is very lacking in detail. I do not agree at all with ending Medicare based on economic, political reasons and it is unfair; it loses on all three fronts, but Obama’s plan does lack a lot of specifics. Either way it is nice to see both sides propose at least something to reduce the deficit even if it is political posturing only.
One option is we can agree to pay higher taxes (note the word “we” not just the other person). Not a popular option.
Another option is cut back on government programs we derive benefits from (note the word “we” – not just programs other people derive benefits from). It would be a tremendous hidush if this happened.
The third option is the US goes broke (similar to the PIIGS today, or Germany in the 1923, but much worse since the US is the world’s sole economic superpower).
If I was offering on, I bet on the worse case scenario, and hope to be pleasantly surprised. Americans are infamous for opposing taxes while favoring benefits.