More Cliffs Ahead

          Ok, who’s sick of hearing about a financial cliff? That’s called consensus. The fiscal cliff bill made the Bush tax cuts permanent but raised taxes on ½ of one percent of the population. It is certainly a symbolic statement of equity for Main Street and Democrats. However, it may be a Pyrrhic victory as both sides are less likely to negotiate in the near future. In other words, less likely to go to work, i.e. govern. These days it’s all about ultimatums and winning for both sides. Most of the top 2% won. The White House & Congressional special interests received a stimulus, so they won. The American People, not so much. An unsavory bill all around. This bill represents everything wrong with Washington, all the dysfunction and missed opportunities.  

          What’s wrong with those dang politicans? Why won’t they represent the will of the People? They are. But the two Parties are in opposed gridlocked conflict. No, the two Parties are reflecting quite well the will of the American People. Both Parties want a large welfare state and not pay for it, regardless of their rhetoric. That IS the will of the People. When it’s said that social programs are “popular”, they are, as in “Get your Government hands off my Medicare”. The People DON’T want to sacrifice, suffer, or diet down to where they need to be. And ALL the politicians seem to be offering hot fudge sundae diets.

          So the rich get richer, Big Money makes the rules and runs the show, and Congress works very hard...to keep their jobs. That’s the way it is....that’s the way it’s always been, right?

          But didn’t the People clearly say in the last election that they wanted solutions and working together? Apparently not. Look who we elected. A billion dollars was wasted for things to stay the same. We send a mixed message because we have a mixed mind.

          Don’t believe me that BOTH sides want a big welfare state without paying for it? Medicare (actually the underlying out of control health care costs, which are a different animal) is unsustainable. Democrats don’t want to discuss it. Sounds like a bad marriage. The Republicans want tax cuts, certainly Keynesian and certainly irresponsible. If you’re serious about balancing the budget, you have to be serious about bringing more money in the door as well as reducing the use of the national credit card. That’s the not wanting to pay for it part. And Republican “spending cuts”? It seems that if the average Joe or poor people aren’t hurt by spending cuts, they’re not really spending cuts. There are billions in welfare cuts to special interests that can be made. “Defense” and “national security” are some of the fattest pigs at the trough. Domestic spending is a few percent of the budget. If you’re going to talk about cutting spending, get serious.

          During our next national fight, Republicans will squabble about not wanting to pay our national credit card bill, money they themselves spent. Sound nutty? Simple message: The People want a larger government than they want to pay for.

          You can see this same thinking disorder locally as well as nationally. We bitch about wanting better schools , but vote down funding for school districts. We want more firemen, policemen, and bridges that don’t collapse, but vote no to a tax raise for these services. We are psychosocially a house divided.    

          So those weary of cliffs are wandering around the wrong terrain. The recent trauma simply shows that our leaders are incapable of making hard and smart choices. It would be smart to go to work NOW on the next three cliffs, but everybody is dug in and trying to hurt the opposition. And the People end up the loser.

          This blog is about the long term challenge we face, the debt. Our leaders are dysfunctional drama queens unable to deal with our immediate challenges: (1) the debt ceiling, (2) the sequester, and (3) funding the Government. I point out that these guys dug these pits and created these problems themselves, because of gutless can kicking. All of these bills come due in March. Rather than Congress solving problems for the benefit of the People, what are they talking about? Drink a shot every time you hear the phrase “kill the hostage” on the news. See you at A.A. BTW, that hostage is you. The guys pulling the trigger already have cushy jobs , pensions and health care for life. And these geniuses just gave themselves a well deserved raise.

          Our nations short term challenges involve stimulus (aka investment in our country, not sustaining business as usual), growth and jobs. I usually spend a lot of time ranting in this short-term space. I often say that our problem with the national debt is not immediate. The reality is that it is not immediate, but is likely fatal down the road. We can currently easily pay the interest on the debt (around $300 billion) and nations are still throwing their money at us at the lowest borrowing rates in our history. We borrow currently at 40% lower than the time of the last predicted borrowing catastrophe, the last debt ceiling fight/S&P downgrade.

          However, all the partisan posturing is a waste of time. The size and scope of Government will have to be reduced, or revenues will have to be raised to pay for it. Hard choices about Medicare will have to be made. Hard choices about “defense” will have to be made. We should take a cue for The Donald and keep firing people until we discover those capable of making hard choices. The People should also make some hard choices and get their heads clear one way OR the other on the role of Government in our lives. Business as usual is unsustainable all around. We shouldn’t expect elected yahoos whose goal is keeping their jobs to have more clarity than we collectively do.  

          We need to also gain clarity and find people who can make smart choices as well. Certainly the smart thing to do is to means test the whole damn thing. Before you go after Granny, cut out waste, fraud and redundancy and you will bend several curves. Bear in mind you only need to reduce $4 trillion to bend the whole budget curve towards sustainability. Do you think there’s $4 trillion sloshing around a Government without authentic oversight? Do we really need still fund a global empire?

          Did the fiscal cliff bill end the conversation about tax reform? Seriously? Don’t we need to shrink our bijillion page special interest tax code? Don’t we need to rethink small business taxation? Don’t we need to seriously close corporate loopholes that keep corporate tax payments in the single digits, or not at all, or receiving subsidies while not paying taxes? I guess you have those three choices if you write the tax code.    

          Enough about these simple immediate and short-term challenges. The long term problem is the national debt. A few quick definitions to clarify terms: deficit (difference of what we take in to what we spend), Debt (the amount and interest put on the national credit card from the time of the nation’s founding).          The CBO keeps bitching about “unfunded” debt. Like high blood pressure, unfunded debt is the silent killer. This is debt that Congress spends (for those bitching about Obama spending money, Presidents don’t spend money) that is not reported on a budget. Most of what Congress spends is not reported on a budget. What is reported on a budget is very misleading. It would be like you diligently reporting the movie you just bought about horseracing onto your Quickbooks and then running out and buying a polo pony. Doesn’t benefit most people and probably not the smartest spending choice. Congress buys a lot of polo ponies.

          And ponies are expensive. The interest alone on the debt this year is $359,796,008,919.49. This will grow every year due to unreported spending and already made promises. What sort of things are unfunded and unreported? Our trillion dollar foreign adventures (do we still need an empire?), Medicare, Social Security, and the pensions of government workers are all off the books pre-promised obligations. Polo anyone?

          According to the House Ways and Means Committee figures (not in the actual budget if we actually had a budget, we don’t), the actual annual cost of Medicare and Social Security alone is $7 trillion. So gee, that’s very different from the numbers officially reported. Good rule of thumb, whenever you see an “official” figure for the national deficit (how much we’re really paying out versus what we take in), it’s about 1/5 of the actual amount being payed out.

          So I seem to be picking on Medicare and Social Security. Why are these two programs unsustainable? Health care/insurance costs continue to escalate. The population continues to age. The number of workers in the workforce is declining.100% of payroll taxes are used to pay into the current years bills of these two programs. So we’re losing money every year. Make sense?

          But rising costs and an aging population are fraying the social safety net across the board. The FHA last year faced a $16.3 billion deficit, the first in its history. The Disability Insurance trust fund will be depleted by 2016.

          The main problem with massive unfunded debt is that it is invisible. It’s off the books and off the radar. Can this trend be reversed? Not with current thinking. The Republicans can’t cut enough discretionary spending and hurt enough average Joes to fix the budget problem. Democrats can’t arrange the deck chairs on the Medicare Titanic and unpromise what has been promised.    Can we reform this budget mess? The Government has probably gotten too big, spent too much for too long, wasted too much, and promised too much to “reform”. So probably not.

          A different way forward will involve moving beyond stale 20th Century thinking. It will involve authentic honesty and authentic leadership that lays the authentic problems out to the People. The People will have to grow up and help their representatives make tough choices for the benefit of all. Without honesty, leadership, shared sacrifice and tough choices, it is unlikely that business as usual can be sustained. It is unlikely that doing nothing can be sustained. The debt to GDP (& interest) will continue to rise until the whole thing implodes.

          If we just keep on trying to do business as usual (personally and nationally) we’ll be a nation in decline. We will be a very large plane spinning out of control. We have flown very high and will have a very long way to fall. But the end of the story won’t be happily ever after. Time to wake up the pilots.

                   And here you thought that a fiscal cliff fight affecting .05 percent of the population was exhausting.