Charlie Leonard: Inalienable Rights
October 31, 2012
The good news about the election this year, regardless of who wins the presidency, is that it has caused a lot of people to think more critically about the proper size and role of government in our lives.
What this election has not done, however, is grounded that conversation in economic reality. For that, I strongly recommend that every voter – Republican, Democrat and independent – go online and get a copy of “The Moment of Truth,” the report of the National Commission on Fiscal Responsibility and Reform.
To be clear, this is not a political document in the sense that it promotes a Democratic or Republican agenda. In fact, it was written by both Republicans and Democrats, appointed by both the president and Congress to develop realistic solutions for reducing our debt and deficit spending.
Regrettably, this document has largely been collecting dust since it was released in 2010, but its findings and recommendations are even more relevant today given that our national debt has ballooned by almost $2 trillion more since then.
In the introduction to the report, the co-chairmen, Republican Alan Simpson and Democrat Erskine Bowles, stated, “Our nation is on an unsustainable fiscal path. Spending is rising and revenues are falling short, requiring the government to borrow huge sums each year to make up the difference. We face staggering deficits. In 2010, federal spending was nearly 24 percent of Gross Domestic Product, the value of all goods and services produced in the economy. Only during World War II was federal spending a larger part of the economy. Tax revenues stood at 15 percent of GDP this year, the lowest level since 1950. The gap between spending and revenue – the budget deficit – was just under nine percent of GDP.”
How bad is it?
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The authors found that “By 2025 revenue will be able to finance only interest payments, Medicare, Medicaid, and Social Security. Every other federal government activity – from national defense and homeland security to transportation and energy – will have to be paid for with borrowed money. Debt held by the public will outstrip the entire American economy, growing to as much as 185 percent of GDP by 2035. Interest on the debt could rise to nearly $1 trillion by 2020. These mandatory payments – which buy absolutely no goods or services – will squeeze out funding for all other priorities.”
To give these numbers some additional perspective, Greece had a debt of about 130 percent of GDP in 2009, when things started to unravel. Today, with the near-total collapse of their economy, their debt is still not at the 185 percent level that we are headed for in the next 25 years.
To the displeasure of lots of Democrats, the commission recommends lower tax rates but dramatically fewer deductions. It also makes it crystal clear that both the Medicare and Social Security programs need major changes in order to continue paying any benefits in the future.
What kinds of changes? The only ones that make a difference, such as raising the retirement age, reducing benefits for wealthier retirees and, yes, asking people to contribute more to their own health care costs.
The report has an equal share of recommendations that didn’t sit well with a lot of Republicans. For starters, it called for lower defense spending and more tax collections, even if proposed at lower rates.
But like so many of the recommendations for reducing spending, they are not suggesting actual cuts – just reductions in the growth of spending we’ve been on year after year. And in terms of taxes, the commission points out that even if we are successful in reducing the size of government closer to historical levels of about 20 percent of GDP, we still don’t collect enough taxes to have a balanced budget.
Those are the facts.
Despite what both sides have been saying, the commission’s analysis proves that it’s not possible to balance the budget simply by increasing taxes on the wealthiest. Nor is it possible to balance the budget through spending cuts alone. And for that reason, the report makes a special appeal for everyone to start being honest about the choices we face. How refreshing would that be?
You can find the report at http://www.fiscalcommission.gov. Take 30 minutes and read it. Then tell everyone you know that they need to read it, too. Because regardless of who wins the election, we are all going to have start being a lot more honest about the choices we face than what we’ve seen or heard during the current campaign.
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