Skip to comments.The Coming Age of Austerity
Posted on 11/06/2012 6:12:17 AM PST by Kaslin
"Are the good times really over for good?" asked Merle Haggard in his 1982 lament.
Then, the good times weren't over. In fact, they were coming back, with the Reagan recovery, the renewal of the American spirit and the end of a Cold War that had consumed so much of our lives.
Yet whoever wins today, it is hard to be sanguine about the future.
The demographic and economic realities do not permit it.
Consider. Between 1946 and 1964, 79 million babies were born -- the largest, best-educated and most successful generation in our history. Bill Clinton and George W. Bush, both born in 1946, were in that first class of baby boomers.
Assume that 75 million of these 79 million boomers survive to age 66. This means that from this year through 2030, an average of nearly 4 million boomers will be retiring every year. This translates into some 11,000 boomers becoming eligible for Medicare and Social Security every single day for the next 18 years.
Add in immigrants in that same age category and the fact that baby boomers live longer than the Greatest Generation or Silent Generation seniors, and you have an immense and unavoidable increase coming in expenditures for our largest entitlement programs.
Benefits will have to be curbed or cut and payroll taxes will have to rise, especially for Medicare, to make good on our promises to seniors.
As for the rest of our federal budget of nearly $4 trillion, we have run four consecutive deficits of over $1 trillion. To bring that budget to balance, freezes would have to be imposed and cuts made in spending for defense and other social programs.
From California to Wisconsin to New York, we see the process at work at the state level. Government salaries are frozen, government payrolls are cut, government pensions and programs are scaled back.
California and Illinois are on the precipice of default. Cities like Detroit, Birmingham, Stockton and San Bernardino are already there.
As for national defense, how long can we afford to spend more than the 10 other top nations combined? How long can we continue to defend scores of nations half a world away? How many more trillion-dollar wars like Iraq and Afghanistan can we fight on borrowed money?
Moreover, the day of the great national enterprises is over.
FDR had his New Deal and World War II, Ike his federal highway system, Kennedy his space program, LBJ his Great Society, Reagan his military buildup and tax cuts, Bush his two wars and tax cuts, Obama his Obamacare.
But there is nothing left in the till to do big things. One sees only deficits and debt all the way to the horizon.
Europe has arrived at where we are headed. In the south of the old continent -- Spain, Italy and Greece -- the new austerity has begun to imperil the social order. In the north, the disposition to be taxed to pay for other nations' social safety nets is disappearing.
With government in the U.S. at all levels consuming 40 percent of gross domestic product, and taxes 30 percent, taxes will have to rise and government spending be controlled or cut. The alternative is to destroy the debt by depreciating the dollars in which it is denominated -- i.e., by Fed-induced inflation.
But you can only rob your creditors once. After that, they never trust you again.
There is another social development rarely discussed.
The workers who are replacing retiring baby boomers in the labor force are increasingly minorities.
Black folks and Hispanics alone account now for 30 percent of the population -- and rising rapidly.
Yet these two minorities have high school dropout rates of up to 50 percent in many cities, and many who do graduate have math, reading and science scores at seventh-, eighth- and ninth-grade levels.
Can their contributions to an advanced economy be as great as were those of baby boomers of the '60s and '70s, whose SAT scores were among the highest we ever recorded? U.S. scores in global competition have been plummeting toward Third World levels.
Everyone talks about how we are going to raise test scores. But, despite record and rising investments in education per student, no one in decades has found a way to do this consistently.
Moreover, while boomers were almost all born into families where mother and father were married and living together, Hispanics have a 53 percent illegitimacy rate, African-Americans a 73 percent rate.
Among the white poor and working class, the illegitimacy rate is now 40 percent -- almost twice as high as it was in black America when Pat Moynihan wrote his 1965 report on the crisis of the black family.
And between the illegitimacy rate and the drug-use rate, dropout rate, crime rate and incarceration rate, the correlation is absolute.
Some of us are often accused of always "crying wolf."
But it is worth noting that one day the wolf came.
However, in our culture of today, the people who like to portray themselves as the Tom Joad of today aren't really interested in work of any form. They aren't even interested in relocating. They are only interested in locating the government check that they all feel (demand) they are entitled to.
If Romney wins, and we all stay involved, the boot of Government will be removed from the necks of Americans. If we have an energy boom in the whole country as they are having in North Dakota, then there will be enough revenue to pay off the debt and phase out Social Security.
Pretty much says it all. Buchannan gets it right again. Western Civilization is doomed; actually, it has been for quite some time. We are in the twilight time, soon to enter the great, long night of decline.
No, it won’t.
This is what I keep hammering on here at FR: The numbers are such that we’re passing (or have just passed) the point of no fiscal return without real, substantial pain.
The GOP has been buying into this idiotic meme that we can “grow our way out of our deficits” for years - over a decade now. A decade ago, it might have been possible if the GOP had manned up and made the right cuts and the right trade policy changes.
Now, the spending numbers are overwhelming the economy’s ability to generate growth (and therefore new tax revenue).
Ryan’s spending plan is a farce - it takes far too long to get to a state where we have only a $400B deficit - never a balanced budget. If we want to turn this around and avoid a EU-style implosion, we need to be talking about cutting at least $500B in real spending cuts this year, next year and the year after that. The GOP stupidly says “no defense cuts,” when the DOD budget is bloated beyond it’s mission, the DNC says “no entitlement cuts” when there’s at least $60B of fraud in Medicare alone per year, and who knows how much other fraud.
The only way to get out of the situation we’re in now is to tell the truth: There will be pain. Much as happened in Iceland, someone needs to have the balls to come forward and say “We’re not going to backstop the bankers. Banks will fail.”
Romney will do none of these things. He’ll be an improvement over the village idiot we have in office now, but these milquetoast Ivy League dandies who the GOP keeps running for office never have the balls to tell people “There will be real cuts. There will be pain. In the end, to clean up this mess, some people who have been living off the taxpayer are going to go broke.”
Well stated post. Of course I happen to agree with your analysis, but I also enjoyed your description. It’s useful for me to explain the points to others.
There is a season.... Seems these things have all been done before. What one learns from history is that no one learns from history.
“It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments”.
‘Abd-ar-Rah.mân Abû Zayd ibn Khaldûn (1332-1406),
All indications is it’s going to be a President Romney, but the GOP celebration is going to be short lived. Reality is coming and the election isn’t going to change that
We could have let the banks fail in 2008 and been in a roaring recovery by now. Except for two problems: McCain and Obama (and their enablers). The cost of bank failure would have been trillions, but instead we watched Obama spend trillions digging union made holes. Now the tab is higher and the economy is weaker.
THAT is the problem. An honest, hard-working populace could handle the debt crisis. But that doesn't describe a large percentage of the population.
This is not “growing our way” out of the deficit. This is “selling our Oil and using our Natural Gas” to pay off the debt. Then comes the hard work of dismantling 100 years of the Progressive Agenda to get us back to our Founding Principles. That means dismantling both the Democrat and Republican establishments because they are all Progressives of one temperature or another. But none of this will happen if We The People decide that our job is done.
The only silver lining would be the return of cheap energy.
That would get discretionary spending up and the multiplier would be high.
The world does not care about Honey Boo Boo and the idiot society that makes such a show possible, let alone profitable. The rest of the world looks at us, and because they see how easy we have things, wants to steal some part of it. And they have found legal ways to do it, and laugh at us while they do so.
And Americans are too stupid to realize that decisions have consequences. We are like little kids that stick their fingers in their ears and yell so they cannot hear the adult voice in the room. The only hopeful part of this is that we know that chaos precedes the Second Coming. In the mean time, keep your powder dry, my friends.
The fix for education is fairly simple, in fact, it is inevitable. Making it happen doesn't take "finding" as much as it takes the guts to do it.
There is no way out of this without serious cuts. SS will be cut. Medicare will be cut. Defense budget and pensions will cut. The space program will need to be cut. Places like northern Virgina and DC will see a collapse in property values and employment unprecedented.
That will (not might, will) mean great societal upheaval. Up to and including massive civil unrest and the nation breaking apart. There is no money. The Empire is broke, and we need to decide on how to transition to the next phase.
After 4 years of zero blaming Bush for everything imaginable, Romney could truthfully blame obama for the next four years but I don't look for it.
You're right, There has been enormous damage inflicted on our country by the liberal/marxists in the past 4 years and it won't go away quickly.
How about "sanity"? ..."responsibility"? ..."accountability"?
Proper government can function just fine within a reasonable budget and by modest taxation. We know this is true because it's been done before... here!