We Have Been Warned
8/5/11 - S&P downgrades the U.S. for the first time in U.S. history
1/13/12 - S&P downgrades nine euro-zone countries and euro bailout fund
1/27/12 - Fitch downgrades five euro-zone countries
1/30/12 - Greece negotiates for a 70% default on bonds
1/31/12 – Congressional Budget Office estimates 2012 deficit to exceed $1 trillion for fourth year in a row
Despite these facts, our politicians continue to debate whether it would be better to cut taxes or increase spending to stimulate our economy. We have a moral obligation to live within our means and to repay the money that we have stolen from our children. Unfortunately, our career politicians are more interested in buying votes than in paying our bills or in solving our real problems.
Reaching agreement to solve our problems will clearly not be easy. It starts with replacing career politicians with leaders who are bold enough to propose real solutions, not just temporary fixes that will result in much larger problems a few years from now.
The new leaders must be willing to compromise on details while holding firm in their demand for fiscal responsibility. Consensus can be achieved as long as we elect leaders who are more interested in solving our nation’s problems than they are in pleasing special interest groups or demonizing their political opponents.
Consensus is most often achieved by first focusing on areas of agreement. The vast majority of our country appears to agree with some basic principles:
1. We must live within our means.
2. We must pay interest on the national debt.
3. We must honor established trust funds; in other words, taxes collected for a specific program (such as Social Security) should be dedicated to that program.
4. We must provide for the national defense, at least to the level provided by the Clinton Administration (smallest budgets since WW II).
5. We must provide for the base operation of government, including the federal court and prison system and basic administration of the above programs.
These programs, which very few people would argue against, consume roughly 14% of our economy. While there are many other things to spend money on, these appear to be the items that have the broadest support.
The good news is that our country has typically raised about 18% of the economy in government revenues; thus, we can afford these core programs. But there are many proposals vying for the remaining funds, including spending programs, tax cuts, and debt reduction. All told, these proposals total about 25% of the economy, and yet we only have a remaining budget of 4-5%.
This is where compromise will have to come into play. My goal will be to ensure that at least a portion of the remaining budget is devoted to repaying the money that we have stolen from our future and that our budget does not exceed expected revenues.