Sunday, July 31, 2011

What's the Real Cost of the Debt Debate

We have a deal on the debt.  Like most political compromises, it sucks in everyway, nobody got what they wanted and the American public got screwed.  Already, people are talking about who won and who lost, and quite frankly, it doesn't matter.  Talk of only $1 trillion in cuts over 10 years is irrelevant because after 2012, the next Congress will do whatever it wants and unless something changes, we will have a similar "crisis" in a few months or years.

No matter what the parameters of the deal might be, there is a cost that almost no talking head will talk about, and it is a cost that hurts me unlike any other.  The loss of faith in government.  It is that faith, that belief in government that has been lost that is the true cost of this debt debate.

If you ask anyone who knows me, I have always been a big believer in our system of government, I have always beleived that ours is the best form of government on the planet.  But is is not perfect and I know that.  Yet for some reason, this time around, the inefficiencies have been exacerbated by political parties and the one feature of our Constitutional system that was predicatable--fixed elections.  The Framers were mistrustful of political parties and like much of their early predictions--were very right about the potential negative impact of parties.  But, I don't think the Framers fully anticipated the impact of regular elections and the negative influence they would have on our political discourse.

But then, I don't think the Framers envisioned a full time Congress either, so they might not have anticiapted the problems created by having elections every two years.  This debt crisis and deal is the first truly national issue that not only could have been avoided, but is a result, in part, of the inability of our politicians to look further than the next election.

Everyone knew, before the 2010 election that the debt ceiling limit was being approached, but neither party wanted to be responsible for screwing up an election, so they kicked the can down the road so that the current Congress would deal with the problem.  So, a stop gap measure was implemented.  While no one would have been able to pinpoint a day, everyone in Congress and the White House knew the problem was there.  But in a rush to position themselves as the heroes for the next election, or to punish the other side, they stake out a position designed to appease some segment of their base and only reluctantly move off that position.

Thus, the politlcal parties (both of them) spend more time playing a massive game of political chicken.  The problem is that they are not hired to play chicken, but to make decisions.  What I have learned is that no matter what, Congress and the President (any Congress and any President, not just these) appear to be incapable of making any long term decision and won't even make a short term decision without a figurative gun to their head.  The reason for it is clear--they worry about the next election.  Since the next election is as sure as the sun rising tomorrow, they can plan their decisions, or lack of decisions, around the beginning of November every even numbered year. 

So political parties and fixed elections have robbed the American people of leaders capable of making the tough decision for the long term.  No decision is considered for its effects beyond the next election.

The people who populate the system have corrupted it to the point where I no longer recognize the system I love.  Sure, the structures are still there, but it is no longer a system of limited government, of course, it probably hasn't been since before I was born, but now I just don't have faith in the ability of Congress and the President to make a decision until a crisis is truly upon us. 

We won't be able to address problems like Medicare and Social Security or other problems that are slow to build becuase there is not urgency.  But acting takes courage and quite frankly, we don't have leaders with courage.  The adherence to a political party (and the necessity of affiliating with a party) and the regular metronome of elections makes courage unnecessary.  All it takes is a willingness to care more about your re-election than about making America better. 

So the cost of the debt debate is not how many trillions in debt limit we get or what gets cut in the budget.  It is the loss of faith in government and our leaders.  We might be able to cut the budget, reduce our spending, and maybe get a surplus back, but replacing and restoring faith in governemnt--that might not ever happen in my life time.
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Thursday, July 28, 2011

Let's Do a Little Math

A vote will happen in this weekend about the debt deal. Let's make no mistake about the debt deal is going to screw the average taxpayer and won't even pretend give my kids the courtesy of a kiss before screwing them.

In exchange for a trillion dollar increase in the debt ceiling we will have an unenforceable promise to cut spending by a similar amount over the next ten years.

But what kind of debt are we running? Well as Victor Davis Hanson points out out government is borrowing about $4 billion a day. Yes, you read that right--$4 billion dollars a day. At 365 days in a year, we are talking $1.460 trillion a year. That is what this country is borrowing every year. President Obama proposed a $3.7 trillion dollar budget for 2012. At the current rate of borrowing, the President's budget is supported by a 4o percent borrowing ratio.

But those are some pretty big numbers, hard to wrap your head around. So let me make it a little more understand able.

Let's say your household budget is $100,000 and you are borrowing at that same 40% ratio. That means you are borrowing $40,000 per year. Your income is just $60,000 per year. That means in two years, your debt will be 25% more than your income. In three years, your debt would be equal to your income. Clearly, such a household budget is unsustainable.

But how does the government keep going without problems from its creditors. Simple, the governmnet can do something you can't--print money. Oh, and they can raise their own credit limit. Try calling your credit card company and saying--"gee Visa company....I like living the way I do, so I know I owe you $10,000, but i am going to increase my debt limit with you to $20,000 and not pay what I currently owe."

Sounds ludicrous right, but that is exactly what Congress has been doing and no one is calling them on it.

Well, I am now. It is time to stop kicking the can down the road. We cannot borrow 40% of our budget anymore. Give you representatives a call--put their feet to the fire.