Saturday, April 9, 2011

A Shameful Act of Political Theater

For weeks Republicans and Democrats wrestled over the budget, nearly shutting down the federal government. Republicans portrayed themselves as valiant fiscal conservatives fighting to save the fiscal future of the nation with $68 billion in cuts, which Senator Robert Menendez (D-NJ) referred to as "extreme." Democrats presented themselves as defenders of the people with Schakowky (D-IL) fasting to protest the "draconian, reckless and mean spirited cuts" and Representative Louise Slaughter (D-NY) claiming that Republicans had come to "kill women." At the end of the day, "tough decisions" were made and $38.5 billion in "painful" cuts were agreed on. At a quick glance this appears to be a substantial number, but a careful analysis of the cuts shows that both sides have engaged in shameful act of political theater rather than serious attempts to address our daunting fiscal crisis.

To better understand this sham, we need to reduce it to a more human scale by erasing nine zeros from the $3.818 trillion dollar budget, 2.17 trillion in revenue (taxes), 1.645 trillion dollar deficit and the 14.26 trillion in total debt. If we conceptualized of the government as a family, its income would be $21,700, it's total expenditures would be $38,180, bringing its yearly deficit to $16,450! But wait, it gets much worse; this year's deficit would bring the family's total debt to $142,600! What would you say to such a family? Even the most mild mannered accountant would slap the mother and father across the face and yell out "what in G-d's name were you thinking all those years, living way beyond your means? If you do not immediately and drastically change your ways, not only will you doom yourself to certain bankruptcy, you will burden your children and grandchildren with crushing debt."

So, how does this family respond to their impending financial doom? The "fiscally conservative" republican father proposes a spending reduction of $68, causing the "compassionate" democratic mother to go into histrionic convulsions. In the course of their fight, she claims that this "extreme" cut will starve their poor children, failing to see that the biggest threat they face is looming bankruptcy. And rather than focus on reducing the expenses that comprise nearly 80% of their budget (entitlement & military spending), the republican father ignites a firestorm by bring up highly contentious, but fiscally meaningless expenses (NPR, Planned Parenthood and the EPA) that constitute less than 1 penny of their budget! That would be equivalent to chastizing their son for his purchase of a single stick of gum, while ignoring the brand new car that they just bought on credit. Of course, the family should debate and vote on these philosophically and morally significant issues, but only once they have resolved their grave fiscal crisis.

 After much contentious debate, they finally reach a compromise and decide to cut their yearly expenses by $38.5 dollars. They hail their great accomplishment even though it only represents a 0.231% reduction in their yearly deficit. Clearly neither the mother nor father are serious about getting their finances in order. But, even if they were, their efforts to cut their budget were doomed from the start was because:

- they categorized 57% of their expenses (social security, medicaid & medicare) as  mandatory.

-they refused to consider seriously scaling back their bloated home security system (military), which account for 20% of their budget.

-6% of their budget went towards servicing the interest on their huge loans.

-this means that they could only work with the 17% of their budget that they considered "discretionary, non-defense." A modest reduction of 6% of these expenditures would slash around 35% of their discretionary expenses.

"But way," you say, "can't they solve this problem by increasing their revenues (taxes)?" By reversing their Crazy Uncle W's revenue cuts they would lower their yearly deficit by $370, which is a good start, but without drastic spending cuts, it would barely make a dent in the $16,450 yearly deficit. And clearly the problems of the federal government cannot be solved by "cutting waste" and "eliminating earmarks"; as infuriating as they may be, they constitute a very small portion of overall spending.

On a fundamental level, this problem is philosophical; we will never get our fiscal house in order until we seriously reconsider our vision of the proper role and responsibilities, size and scope of the federal government. We must free ourselves from financially unsustainable and morally corrosive notions of entitlements; we are neither entitled to what we cannot afford nor are we entitled to the wealth of others, especially of future generations. More than anything, we the people of United States must reject shameful acts of political theater and demand that politicians take serious steps to put us back on the path to a sustainable financial future. Having our crooked Uncle Bernanke (continue to) expand the money supply is not an acceptable solution; this will lead to inflation and the debasement of the dollar. The only viable solution is for the federal government to live within its means, just as every family must eventually do. The Republicans will have to swallow the bitter pill of tax hikes and the Democrats will have to acquiese to major cuts in entitlements. The longer we delay this, the more painful the needed economic and cultural corrections will be.

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