The Fiscal Quandary of Deficits and Reductions
By Clark Barrow
August 13, 2012
Despite all the talk about cutting spending and getting the U.S. federal government’s fiscal house in order, conservatives have failed to establish any policy victories. Our debt is still growing. Yet, the slight reductions they have achieved in spending growth rates threaten to put millions out of work, highlighting the devastating economic quandary of either option.
U.S. Congressional Republicans have put up a fight against the runaway spending. But, they did not win the battle. Fearing that they would be blamed for a government shutdown, Republicans caved in summer of 2011 and agreed to a deal crafted by the Democrats that established a special committee to cut the budget. In case the group failed, the plan also included an across the board $1.2 trillion automatic budget cut over 10 years in discretionary defense and non-defense spending. Well, guess what? The group failed and the cuts are set to begin in January 2013.
While this sounds good at first, it is not the conservative victory that we all hoped for. Using the government’s baseline budgeting technique, the cuts will only slow spending increases as they reduce budget increases, not the total funding levels. These cuts will just slow the growth of the spending, not the overall amount!
Even though these cuts only slow the rate of spending increases, the outcry and economic impact is expected to be tremendous. A 2012 study by George Mason University found that the cuts to discretionary defense spending will cause the economy to shed more than 2 million jobs that are connected to U.S. Defense Department funding. While these jobs losses are unfortunate, the failure to make substantial spending cuts will send the U.S. federal debt to unsustainable levels, crippling the entire economy and shattering the dreams of millions of more Americans.
As Congress plays with budget cuts that do not reduce the budget, our real national debt is only increasing. To make matters worse, our real, true national debt is much higher than the frequently reported $15.9 trillion. After accounting for the U.S. government’s public debt, federal employee pensions and other retirement benefits, current and expected obligations for Social Security and Medicare, the National Center for Policy Analysis said the U.S. federal government faces unfunded liabilities totaling $84 trillion. No budget tricks here. These are promises our government has made to its citizens.
Sadly, Democrats have refused to include reforms to entitlement programs in any budget talks. Social Security and Medicare are considered mandatory, non-discretionary items and will continue to grow regardless of the actions of Congress or the White House. Individuals who paid into these programs should certainly receive their benefits, but our nation must reform entitlement programs before the $84 trillion debt is due over the next several decades. If nothing is done, millions of retirees will either receive nothing or a reduction in benefits, receiving less than they paid into the system.
We have heard these kinds of warnings before. Well before the mortgage meltdown of 2008, President George W. Bush repeatedly asked Congress to address the fiscal catastrophe that Fannie Mae and Freddie Mac were headed toward. Congress didn’t listen. Instead, Bush was stonewalled and when the meltdown occurred, taxpayers paid the price with a $169 billion dollar bailout. Even with all the talk of reform and budget cuts, our government still owns the unreformed Freddie and Fannie. No progress has been made.
Democrats in Congress disregarded the warnings about Freddie and Fannie and they are ignoring the tsunami entitlement spending with Medicare and Social Security that will produce the same kind of results. If nothing is done to actually reduce federal spending soon, the 2008 bailouts will seem like a drop of water in the middle of a hurricane.
What can we do about this? As Americans who care about the future of our country, we must elect leaders who will address the financial doom that is on the horizon. The legislative actions that are required will be difficult and may not be good for their careers, but inaction guarantees the collapse of the United States as we know it today.
Read More: www.ClarkBarrow.com