The Deficit Hoax

adamyoshida.com ^ | April 15, 2004 | Adam Yoshida

[victoryatallcosts]

The Deficit Hoax

Those who are throwing a fit over a few billion in spending by the Bush Administration (and who are not, as many Democrats are, deathbed converts to the concept of fiscal responsibility) are missing the point. A few billion here and there are nothing in the face of the fact that, according to the non-partisan Concord Coalition, the unfunded Social Security and Medicare liabilities of the Federal Government are (in present-day dollars) somewhere in the neighbourhood of 24.1 trillion dollars and this number is growing with each passing day, each birth, and each expansion of the span of human life. Twenty-four trillions dollars twelve times the present Federal Budget. The entire accumulated assets of the United States are estimated today are estimated at a mere thirty-nine trillion dollars. That debt is, in essence, simply beyond the means of the Federal Government to pay in any fashion acceptable to the American people. Given this, it’s hard not to see the present-day spending by the Federal Government as little more than a pre-bankruptcy credit card spending spree.

If the Federal Government will have to, in the future, pay trillions and trillions of dollars in other obligations, then what’s a few billion today? It really won’t matter at all unless something is done to combat the larger problem of entitlement reform.

Now, these liabilities won’t have to be paid out all at once. But, with each passing year, they will increasingly begin to strain the ability of the Federal Government to pay. As a result, one of four things will have to happen:

1) Benefits will have to be drastically curtailed in order to allow them to be met by present revenues. This would involve both the extensive use of means testing and, in all probability, actual and substantive cuts in the benefits paid out.

2) Taxes will have to be raised massively, perhaps even doubled, in order to meet the obligations of the system. In a society (such as might exist in the year 2040) where the average human life-span is ninety years, this is a much more real possibility than it would initially appear. There will simply be a lot more old people to vote themselves higher benefits (or to shield themselves against benefit cuts).

3) The Federal Government will, through some combination of blindness, incompetence, and intransigence, be simply allowed to go bankrupt.

4) Some demagogue will come along and propose some bizarre panacea “X solution” which, while economically impractical, will have great emotional appeal. Included among these solutions might be the printing of fiat money combined with wage and price controls, the nationalization of all privately held pension funds to create a single (and well-capitalized) “national pension”, or whatever other nonsensical “solution” may be dreamed-up and sold.

Naturally, all four of these solutions might be attempted, or any combination thereof. Of course, expecting the Federal Government to do anything about any of this before they absolutely must is probably unrealistic. Frankly, you’d probably do well to horde various assets in view of making a real killing during the Second Great Depression which, odds are, will arrive some time in the next twenty to forty years.

The only real chance we have is to get to work now on entitlement reform. The first (and most obvious steps) are entering market elements into both Medicare and Social Security. That, in my opinion, is the only real justification for the prescription drug benefit: it managed to finally put a real market element into the socialized mess that is Medicare. The same must be now done for Social Security.

What must be done over the next decade or so is to quietly gut these programs in ways whose scale will not become apparent for some period of time (preferably when the other party is in power). Very few would put up with an open emasculation of these entitlements, but I’m sure that there are enough clever Republican lawyers up there to pull it off softly and in such a way that, even if the Democrats raise a fuss, it will be largely incomprehensible to the public.

After all, every time the Republicans try to make any change to Social Security or Medicare the Democrats like to scream that they’re, “destroying X entitlement!” As a result, they’ve become a little like the Boy Who Cried Wolf: when we really come for these programs, no one will believe them.

This, of course, demonstrates the absurdity of the claims of those who are planning on voting for John Kerry for President this fall to ensure “divided government.” The only spending which really counts, when it comes to the long-term fiscal health of America, is this entitlement spending: everything else makes a difference mostly on the margins. Democrats will not move an inch on entitlement spending, so we must go with the GOP.

The strategy to me is obvious: there’s already a strong contingent of Republican fiscal conservatives on the Hill, but they’re essentially in the minority. The reason why Republicans are so seemingly impotent in their control of the Congress is that the present Republican “majority” is as illusory as the Democratic “majority” that existed for forty years.

In those years, for much of the time, the effective majority in the Congress consisted of Southern Democrats and minority Republicans. A look at the behavior of the Senate over these past years shows that the effective majority is between the Democrats and liberal Republicans. While most successful votes have been on issues where the majority of Republicans have been joined by moderate or conservative Democrats there has been virtually no movement on areas where the liberal Republicans and the Democrats are in agreement. Combined, they can block virtually any item on the President’s agenda if they so desire. Hence the bills which, while they originate from a conservative ideal, become bloated, liberal, trash by the time they become law (No Child Left Behind and the Drug bill being the prime examples).

The Republican majority must be increased to the point where liberal Republicans can be purged from the party. At this point they have virtually zero support among mainstream Republican voters anyways. One by one liberal Republicans from conservative states can be picked off, along with “moderate” Democrats from conservative states, eventually leading to an actual majority of conservative Republicans.

Divided government promises gridlock. This may be a good thing in times of peace and prosperity. I doubt its value in the face of a war and a looming economic crisis.

[gcruse]

Only big-government leftists say things like, "A few billion here and there, so what?"