This article first appeared in the St. Louis Beacon, June 2, 2011 - For most, school's out for the summer. Let's celebrate that felicitous development with a pop quiz:
You are the head of a household and a wage-earner. As such, you have acquired the usual debt associated with middle-class subsistence -- mortgage, car loan, maybe you carry a balance on a couple of your credit cards. None of this is particularly alarming so long as your debt-to-earnings ratio isn't completely out of whack.
Recently, however, you've been hit with unexpected expenses, and you now find that you have to borrow money just to meet your minimum obligations. You are thus deficit-spending. This situation is untenable because you grow deeper in debt every time you pay your bills.
Your best course of action is to:
- increase your income
- decrease your spending
- both of the above
- or set up a counterfeiting operation in your basement to cover the shortfall
If you answered anything but "3," you should probably stop reading now and run for Congress. If you answered "1," file as a Democrat; if you answered "2," file as a Republican. Those who selected "4" are philosophical Democrats but as a matter of practicality, can run under either party's banner.
Of course, all of these options involve pain. To increase his income, the wage-earner will have to either find a better paying job or work more. (Good luck with the former in the present job market.) In all likelihood, the poor schmuck is going to wind up sacrificing evenings and weekends with the family to work a part-time job.
Similarly, reducing expenditures will cause discomfort. You might eliminate the premium movie channels from the cable package -- or perhaps, drop cable TV altogether. And forget about that getaway to the beach with your significant other. Here again, no pain, no gain.
The counterfeiting option is superficially attractive because it defers the pain to an unspecified future reckoning. You don't have work more today and/or spend less tomorrow, but you do have federal prison awaiting you.
Our elected representatives in Washington are struggling with a similar conundrum and its distasteful consequences. In the past 10 years, they have somehow managed to convert a $330 billion surplus into a $1.27 trillion deficit, and now no one knows exactly what to do about the problem.
Democrats would increase the government's income by repealing the Bush tax cuts for the wealthiest Americans. That solution won't cure our woes, however, because we could seize all of this group's private wealth and we'd still be mired in debt.
Republicans declare that all options are on the table except raising taxes on the leisure class. They would thus do away with cancer research before raising the tax on yachts.
And though each side blames the other, both are complicit in the enterprise of printing money now to forestall the day of reckoning. As the federal debt hit its legal limit of $14.3 trillion on May 16, that day may be upon us. Should the government default on its obligations, the banking collapse averted in 2008 by the TARP program will take place -- this time taking with it the full faith and credit of the United States.
I don't have any magical solutions, but I will suggest a few rather obvious facts and the equally obvious inferences to be drawn from them.
Lowering taxes does not raise government revenue.
Sorry supply-siders, but increasing government revenue by decreasing tax rates has been tried and found wanting. Reagan gave it a go, as did his loyal student, George II. Both experiments ended with record deficits. Read my lips: lower taxes = less revenue.
Tax collections must increase and, given the sorry state of the economy, the only people who can afford to pay more are the rich. That observation has nothing to do with class warfare and everything to do with arithmetic. The income tax on the top 2 percent and estate taxes must revert to Clinton-era rates.
1 percent of a big number is also a big number
Any viable enterprise should be able to survive on 99 percent of its revenue. This year's federal budget was $3.38 trillion. A 1 percent across-the-board reduction would have saved $33.8 billion -- not enough to right the ship of state, but a step in the right direction.
We're over-extended, so Big Bird may have to take a hit
American troops have been stationed in Germany, Japan and South Korea throughout my lifetime. Isn't it about time that these prosperous, free-market democracies assume responsibility for their own defenses? Wouldn't we be better and more cheaply defended with our troops deployed here where we live?
Because the government cannot afford to do what it's currently doing, domestic priorities have to be set. As the recent tornado in Joplin again demonstrated, FEMA is vital. Sesame Street, on the other hand, is merely good.
The status quo won't do
We cannot borrow our way to solvency, nor can we balance the budget solely with spending cuts. At present, almost 92 percent of tax revenue is obligated before it is even collected. Most government operations are funded by selling our debt, some of which we are buying from ourselves -- a process known as quantitative easing, or printing money to balance the books. This situation obviously cannot endure.
Extricating ourselves from this mess will require everyone to put a little skin into the game. There are no good alternatives -- only some that are less odious than others. No matter how unpleasant, painful choices must be made because when we administer our budget quiz on Capitol Hill, "none of the above" is unfortunately not an option.
M.W. Guzy is a retired St. Louis cop who currently works for the city Sheriff's Department. His column appears weekly in the Beacon.