A Pee In the Ocean
The Progressive community has wasted much discussion and argument lately opposing specific cuts that are being recommended in federal entitlement programs. While the timing of a general opposition to these proposed cuts may be correct, the truth is that no one has yet considered such cuts in the context of balancing any national budget in the near-term future.
Until balancing the budget is a pre-condition of negotiations, then there probably won’t be much real cutting done, entitlement or otherwise. Witness the most recent pee-in-the-ocean $38.5 billion effort to complete the FY11 budget year. Witness the FY12 budget passed in the House this past Friday, which will not survive a Senate vote.
Ryan = Strike 1; Obama = Strike 2; House = Strike 3
Neither Ryan’s plan nor Obama’s plan nor the recent House plan envisions balancing the budget in the near-term. Hence, all seek to kick the can down the road by postponing the real discussions that need to take place regarding federal entitlement spending.
(update 18 April 2011) In part, because of this, Standard & Poors has downgraded America's debt from 'Stable' to 'Negative'. They understand that not balancing the budget now
- adds to America's already huge debt
- exacerbates the negative consequences of a solution later
- increases the probability of a default.
What's So Important About Entitlements?
Why is entitlement spending critical to balancing our budget?
There are three primary reasons:
First, the federal government currently collects, in total, from all sources, about $2.3 trillion annually. It spends almost this exact same amount on its entitlement programs, the largest three of which are Social Security ($754.1 billion), Medicare ($457.8 billion), and Medicaid ($289.7 billion). The government spends another $800 billion on entitlement programs directly related to unemployment, homelessness, hunger, etc.,.
From this perspective, we have to borrow the additional $1.5 trillion each year to fund the balance of our national discretionary expenditures. Entitlement spending, as a whole, has captured the entire federal revenue stream. There are apparently predictions that indicate entitlement payments for healthcare alone may capture the entire federal revenue stream in the near future.
Second, we, as a nation, spend $3 on entitlements for every $1 we spend on our military these days. To many, this represents a distorted set of priorities at the federal level.
Third, Congress does not apportion, and therefore cannot directly control, entitlement expenditures. They are expenses mandated by statute to qualifying beneficiaries as defined by the rules and regulations promulgated under the authority of the enabling legislation.
Thus, Congress can only manage such expenditures in an indirect way by changing the underlying acts. The non-discretionary nature of these outlays means that Congress cannot eliminate them, double them, decrease them, or increase them by specified amounts, directly. This lack of power over these outlays means Congress is handicapped (insert appropriate joke here) in controlling the budget.
What's So Important About Balance?
Why is it necessary to balance our budget now; and why must it be done primarily by cutting expenses?
Our debt, $14 trillion, is so staggering that confiscating all the wealth of the richest 5% in America would not even pay off 10% of it. And, once you take all their wealth, these rich wouldn't ever be around to soak again. Hell, tax 'em too much; and they disappear. Shit, tax businesses too much; and they disappear. In fact, tax anything; and you get less of it.
However, this debt will be completely gone by 2041 if we simply balance the federal budget every year for the next 30 years. Why is this?
This is because every budget includes outlays for the interest and principal that must be paid during the course of the forthcoming year on our instruments of debt. Balancing the federal budget implies that we will meet our obligations to pay off our debt via these notes, bonds and warrants, very few of which have maturity dates beyond this period.
Therefore, balancing out budget in FY12 . . . and for the 30 years thereafter . . . clears our debt, automatically. In all likelihood, adopting this policy, and implementing it, will put us in the immediate good graces of the entire world that uses the dollar as it reserve currency. Doing anything else at this point only makes our future darker than it already is.
What seems to be penetrating the fog that persists inside the Beltway around Washington DC is the realization that the federal government is subject to checkbook arithmetic as States, Commonwealths, Counties, Parishes, Cities, Towns, school Governing Boards, Fire Districts and Americans, in general, are. Checkbook arithmetic demands that expenditures from one’s account be less than, or equal to, revenues to one’s account.
When this condition is not met, a negative amount will eventually appear as the balance in the check register. As long as this condition persists, the negative amount becomes larger in magnitude (smaller in value).
These chickens are now coming home to roost in a way that is obvious to even the most obtuse Tea Bagger, most inept and uninformed Congressperson, and most bleeding heart Liberals. The IMF is shaking its collective finger at America, as well as other countries, and warning against a debt crisis that even it will not be able to address. In particular, the IMF has stated recently that efforts to restore America’s fiscal health have stalled.
Such over-spending/under-collection has been the case with the federal government since Andrew Jackson was President. Sure, there have been years when the federal budget was balanced. Sure, there were occasions when the federal budget specified greater revenues than expenditures.
In the long term, however, this has not been the case. The disaster is now so great that even Congress, and, more recently, this President, can no longer ignore the impending consequences if our house of cards comes crashing down around our ears.
This force alone will defeat any argument by Progressives to keep entitlement spending the way it is. It’s time for Progressives to find a new model by which the federal government can throw money at social problems to produce a beautiful society.
What "They" Might Do
If the fiscal conservatives in the House are smart (which, as of this past Friday, they are not), a sufficient number will band together to determine whether a budget can be approved or a debt limit increased. If this group is then courageous (which, as of this past Friday, they are not), they will insist that no budget for 2012 will be approved unless it is balanced.
In the event a deficit budget is presented, and cannot be amended to their satisfaction, they will insist that the federal government shut down on 1 October 2011, until a balanced budget is produced. This gives Progressives five months to come up with their proposals.
If these fiscal conservatives intend this to be their strategy, they should announce it as soon as possible, or, at the latest, during the forthcoming debate on raising the national borrowing limit. That is when the discussion on entitlement spending will begin in earnest.
What "You" Must Do
That is when Progressives should have their new models in place for helping the unfortunate. Resistance to what must happen to Social Security, Medicare, and Medicaid will be futile in this environment. It will be much better for Progressives to refocus the conversation away from “saving” these programs in their current state and on to a more fiscally responsible manner of government welfare.