Saturday, December 4, 2010

The Moment of Truth

If you care about this country, I recommend that you take time to read
“The Moment of Truth. Report of the National Commission on Fiscal Responsibility and Reform.”

It’s worthwhile reading, even though I think it’s highly unlikely that we as a nation will suddenly become fiscally responsible. One line in the report’s preamble says it all: “America cannot be great if we go broke.” (I hear that the Chinese are already printing up the T-shirts.)

So where are we?

 Discretionary spending (excluding war related) has grown 34% in last decade
 Federal debt is now up to 62% of annual GDP
 If we do nothing the debt will be up to 90% of GDP by 2020 and 185% of GDP by 2035
 In 2010 federal spending is 24% of GDP…the highest since WWII and revenues will be only 15% of GDP…a 9% deficit gap in this year alone.

Read the report, there’s plenty to worry about. While I tend to be skeptical about economic projections, directionally I think the report is on point. We are headed toward financial Armageddon if we don’t change our ways. Interestingly, it is noted in the report that Admiral Mike Mullen, Chairman of the Joint Chief of Staff, has said that the most significant threat to our national security is our debt.

The Moment of Truth report recommends major reductions in spending and an overhaul of our tax policy. But it’s not going to happen. At least not any time soon. Before we can step up to the Moment of Truth, we must deal with the Truth of the Moment. And the Truth of the Moment is that we are not willing to make sacrifices. Certainly our political leaders are not going to sacrifice their careers by putting the lid on the cookie jar. Personally, I don’t want my taxes to go up and I don’t want to give up my tax deductions. Truth is that most of us do not trust “The System” and therefore we are not willing to sacrifice. Deep down inside we believe that our sacrifice will end up being someone else’s subsidy or entitlement.

I really believe that the first step toward turning this mess around is to impose strict term limits on the members of Congress. Pay them well and help them get real jobs when they leave Congress, but take away the option of being a lifetime politician. We should also offer financial incentives to congressional members, incentives that reward fiscal responsibility. Our current system rewards them for taking care of special interests and doing whatever it takes to get re-elected. As long as we reward that behavior, that’s the behavior we will get.

If you’ve read previous blog entries, you know that I tend to be pessimistic. In this case I am extremely pessimistic. “The System” has evolved to the point where it needs a major overhaul. But all of us are getting something out of “The System” and we don’t want an overhaul that takes away more than it gives. Sorry, but the day of reckoning is here. The Moment of Truth has arrived. Time to pick-up the check and pay for our lunch. And, I mean really pay for our lunch. Not with other people’s money and not with more paper. But as long as we have access to other people’s money and we don’t run out of paper and ink, I don’t see us paying for that lunch any time soon.

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