The Inertia of Government Debt…Can We Strike a Grand Bargain?
No matter your partisan persuasion, everyone agrees that the long-term fiscal situation for the USA looks pretty grim. Our parents – without a trace of malicious intent– have mortgaged our futures in their large houses, large cars, and their speculative stocks; our banks have peddled our stability away through risky lending; our Presidents (chiefly FDR, LBJ, Reagan, Bush 41, Bush 43, and Obama) have spent us wildly into debt; and there is a general sense that my generation will tell our kids of a mystical place called “the 20th century” in which archaic words like “career,” “benefits,” and “pensions” were things that people could reasonably expect. Yet while I’m frustrated and not particularly optimistic about my lifetime prospects, I’m not really angry in the barn-burning, finger-pointing sense. Such behavior is embedded within human nature, and it manifests itself in shortsightedness, an inability to contextualize, an inability to handle complexity, and especially in our difficulty deferring consumption for saving.
Part of the problem is the unstoppable inertia toward debt inherent in the structure of all wealthy economies. Budgetary surpluses are so rare because they are generally seen as morally objectionable, as the government isn’t supposed to take more than it needs. If we were running a surplus I could already see Glenn Beck sobbing and panting for tax cuts, “You’re taking more of our money than you need! Give the extra back, you thieves!” Deficits are nerve-wracking in the aggregate (“our children” and “future generations” being the emotive phrases of choice), yet they are political opium in the particular. People love spending that directly impacts them. Cynically, I would posit that the definition of a pork-barrel project is “money spent in someone else’s district.”
For these basic structural reasons, deficits are almost impossible to remove and surpluses almost impossible to enforce without strong autocratic governments. Which countries have historically had the largest surpluses? Why, those wonderfully democratic countries of China (1st), Saudi Arabia (4th), and Russia (5th)! Among wealthy democracies, Japan comes in 3rd only because they are digging out of decades of debt. Only Germany makes the top 5 on principle, being justly famous for their cultural thrift.
Yet we are a democracy that ostensibly cares about human rights, and we obviously cannot impose the oppressions of autocracy on ourselves for the sake of budgetary management! We’re going to have to do something that no wealthy-yet-indebted democracy has ever done: at some point my generation is going to have to strike a grand bargain to keep our country alive and livable. We’re going to have to cut something massive, fundamentally change the social contract, and learn to live permanently without an expected “right” just in order to survive.
Take a peek at this well-worn chart, and then remember what matters.
While conservatives may have a distaste for agencies such as the EPA or the National Park Service, their contributions are crumbs at the budgetary table. Liberals, think we spend too much on highways? Conservatives, too much on Amtrak? Both of you, relax. Only 4 things matter if we’re going to fix this thing: the Treasury (bailouts), Health and Human Services (medicare, medicaid, and the new subsidies on private insurance), Defense, and Social Security.
Everything else – everything! – is chump change. We could build a national network of high-speed rail for 6 months worth of defense spending. Rail can’t bankrupt us, defense can. Education can’t bankrupt us, but social security and medicare will.
SO WHAT ARE WE GOING TO GIVE UP???
*My personal preference? Probably the elimination of Social Security. I will need healthcare, as I can’t cure my own cancer! But at least I have a fighting chance of providing my own retirement income. Which would I rather have…a fictional pension in a bankrupt country? Or fending for myself in a thriving one? Neither are attractive, but clearly the latter is preferable.