Sunday, May 29, 2011
Balancing the Budget
When a friend of mine was in college she spent a year abroad in Plymouth, England. While there she discovered the ATMs would honor her requests for withdrawals, even if her account did not have enough money in it to cover the withdrawals. Within a few days of making such an unwarranted withdrawal, she would get an official letter from the bank saying, in effect, “Please stop asking us for money you do not have.”
Being a cash-strapped college student, my friend would honor the bank’s request---until she needed money. She would then go to the nearest ATM, ask for money she did not have, and receive exactly the amount she asked for. Again, the letter would come a few days later asking her to PLEASE STOP asking them to give her money she did not have.
This image of a bank playing the victim because they kept giving my friend money whenever she asked for it has been on my mind a lot lately.
The United States is currently in debt to the tune of over $14 trillion. Over 40% of this debt is owed to United States citizens and institutions who have bought government bonds as an investment. Another 18% is owed to the Social Security Trust Fund. China holds roughly 10% of this debt and if they demanded payment for all the bonds they hold all at once, our government and economy would come crashing down. (But then, so would their economy, since without American consumers to buy their products the Chinese economy would go belly-up.)
The reason I am reminded of my friend and those poor British bankers is that America’s debt is not something that has happened behind our backs. Each budget presented to Congress by the President has been approved by both the House of Representatives and the Senate. Many of these budgets have had huge deficits built right in. And yet Congress has approved them anyway. This has happened under Democratic and Republicans Presidents and under Democratic and Republican Congresses. The biggest single-year deficits since World War II have occurred under Barack Obama, George W. Bush, George H.W. Bush, and Ronald Reagan.
The reasons for any particular year’s deficit are hard to counter. There is always a compelling reason to spend more—wars in Iraq and Afghanistan, a global economic crisis---yet, in the end, the procession of reasons for spending more than the government takes in have left us generations-worth of debt.
In this scenario, it is not Congress who are playing the part of those English bankers who could not say no to my friend with her cute American accent and beautiful blue eyes. No. It is us—you and me. The American taxpayers. Year after year we return more than 90% of the Congressional incumbents, in spite of our growing deficits and debt. Congress, in effect, comes to us and says, “We spent all the money and now we want you to give us the chance to do it all again.” And, oddly enough, we say “Okay—here’s the charge card—go for it.”
President Obama put together a bipartisan commission to come up with recommendations for tackling the problem of the National Debt. Their final recommendations were contentious—even among the commission members. But they also lay out a path to fiscal responsibility and a slow balancing of the books. The recommendations were contentious because they involved financial pain for lots of people—lots of VOTERS. You and me. And it seems that we are judged unwilling to vote for legislators who will ask us to sacrifice. From the rise of the Tea Party and the calls from many states to limit the collective bargaining rights of public unions, it seems as if Americans are waking up to precarious state of our national finances.
Personally, I am glad Representative Paul Ryan of Wisconsin has put a budget plan out there. I strongly disagree with his mechanisms for getting spending under control, (tax cuts for the wealthy, in fact, deepen deficits and "voucherizing" Medicare would be a disaster), but he has laid out one vision for trying to get spending under control. I hope the Democrats will formulate a plan of their own soon. And I especially hope President Obama will talk to Americans over the next five years about how to tame out appetites for Federal spending. It has got to start with him and the Republicans showing a willingness to compromise.
OF COURSE we will need to make painful spending cuts Democrats will be opposed to. We will also need to raise some taxes and Republicans will be opposed to this. This is the very definition of a compromise: A solution with which both sides are equally unhappy. In order to get to this point of compromise we need to send a clear message to our representatives in the House and Senate. We need to tell them that we want to get spending under control. We need to do what those bankers in England couldn’t—we need to say no when asked for money we don’t have.
President Obama has shown himself willing to compromise and I have hope that members of his own party and Republicans as well will join him in making hard cuts and painful compromises to get deficits and the debt under control. Instead of a strongly worded plea for Congress and the President to stop asking for money they don’t have, we need to send a stronger kind of message. We need to vote people out of office if they are unwilling to negotiate balanced budgets in good faith and with a commitment to spreading the pain to everyone.