From the New Jersey Star-Ledger, 05/29/08
Politicians ignore the real bridge to nowhere
Posted by Paul Mulshine May 29, 2008 6:31AM
Want to know what I never want to hear about again? The bridge to nowhere, that's what. Throughout this primary election season, which limps to a merciful end Tuesday, I have heard politicians pontificating about how they oppose building that bridge in Alaska.
I would much prefer to hear the pols talk about the one issue that looms above all others in terms of importance. Try to guess what it is. It's not the Iraq war. It's not the price of gas. It's not abortion, guns or gay marriage.
Give up? The biggest issue facing the next president of the United States is that the country is broke. Or at least it would be if it were a business. The accumulated debt of the United States so far exceeds its revenues that if it were a corporation, the federal government would be in bankruptcy court.
You won't hear about this from politicians for one simple reason: Most of that debt is for programs promised to current and future retirees. Social Security and Medicare are too popular to cut. But they're too expensive to fund. So politicians ignore the problem.
Accountants worry about it, however. If you understand numbers, as Sheila Weinberg does, then you understand that the country is on its way to becoming a banana republic, a place where you need a knapsack just to carry currency. In Latin America years ago, I once visited such a country. I needed an inch-thick pile of bills just to buy breakfast, and breakfast cost only 75 cents in American money.
I don't want my kids to inherit such an economy. Weinberg feels the same about her kids. That's why she got involved with the Institute for Truth in Accounting, an Illinois-based group that would like to see government at all levels adopt so-called "accrual accounting" as the heart of its budget process.
In traditional government accounting, politicians can promise endless future benefits while paying only a tiny portion up front. But in accrual accounting, the pols would have to put aside enough money in a trust fund immediately to cover future promises.
If the U.S. had followed that system, the trust fund for Social Security and Medicare would need an immediate infusion of $54 trillion, says Weinberg. That's a lot of dough. And even if we had such a trust fund, another problem would arise.
"Where would you put that $54 trillion?" she asks. "The entire New York Stock Exchange is only worth $13 trillion."
We ran up this debt because pols of both parties voted for popular programs without raising taxes to cover them. A classic was that prescription drug program adopted in the first term of the Bush administration.
"When they passed the prescription drug program, they should have sent a bill for $25,000 to every American," says Weinberg. "They should have asked, 'Do you want that? Then you need to send a check for $25,000 to start funding it.'"
Instead, the pols just added another $8 trillion in unfunded liability to a Medicare system that was already in the red.
But imagine for a second that the pols faced this problem honestly and decided to raise revenue to pay for their promises. How much would taxes have to rise?
The Congressional Budget Office was recently asked that question by Rep. Paul Ryan, a Republican from Wisconsin who is one of the few politicians willing to talk about the problem. In a letter to Ryan last week, the CBO said that the income tax would have to more than double to offset entitlement expenses. That would mean the tax rate on income now in the 25 percent bracket -- where many middle-class Americans find themselves -- would rise to a staggering 63 percent. The top rate would have to rise from 35 percent to 83 percent.
To look at it another way, consider this in terms of GOP presidential contender Mike Huckabee's so-called "fair tax," a national sales tax of about 23 percent. Candidate Huckabee proposed that tax as a substitute for the income tax. But to balance the budget honestly, a President Huckabee would need to impose that big sales tax while also keeping the income tax.
Try to imagine Huckabee -- or Hillary Clinton or Barack Obama or John McCain, for that matter -- proposing such a huge tax hike. That's about as likely as any one of them proposing that we end Social Security and Medicare.
This is one area where the true spirit of bipartisanship reigns supreme. Both parties want to pass this problem to the next generation. So there's your real bridge to nowhere. And every young person in America is going to have to cross it.
Original Referenced Link
My Commentary:
The catastrophe looming over America’s future has roots reaching back 100 years. While the politicians of both parties were the superficial cause of the current crises, I would point to two primary causes.
1. The abandonment of the gold standard and free banking in the early 20th century, culminating in the seizure (looting) of private gold holdings by the FDR administration in 1933. This made possible the systematic looting by welfare state politicians that has led us to the current economic precipice. Statists understand that to advance their agenda, they must seize control of money by replacing gold-based currency with government-issued counterfeit paper whose value is determined by the whims of politicians and their central bankers. This enables the government to engage in the hidden seizure of a nation’s wealth called inflation. To fully understand the connection between the abandonment of the gold standard and the rise of welfare statism, and its link to the current crises that Mr. Mulshine lays out, I recommend Gold and Liberty
, by Richard M. Salsman.
2. Someone (de Toqueville, I believe) once said that Americans would keep their liberty until they allow themselves to be bribed by their own money. Americans willingly sacrificed the freedom (and the responsibility) to plan and control their own future by handing over a lifetime of hard-earned payroll tax money in exchange for the free lunch of government-provided retirement “security.” But their ain’t no free lunch, baby. As Mr. Mulshine’s column makes clear, a blizzard of feathers is approaching as the social security and medicare chickens come flocking home to roost. The years ahead promise to be ugly.
I would certainly agree that we may be heading for “banana republic” status, but the truth may be much worse. Our current national direction may have a more ominous parallels…pre-Hitler Germany. America’s welfare state is modeled on Bismarck’s 1880s Germany, which culminated in the Weimer inflation of the 1920s, economic paralysis, and violent street battles, and which was followed by the rise of Hitler.
It’s hard to see a way out without an economic collapse, hyperinflation, or both. But America has a secret weapon that may yet save us…the unparalleled productive ability of Americans…if and when they can be liberated from the crushing burden of taxation and regulation. But we must stop kidding ourselves. Any long-term solution must include the phasing out and eventual elimination of social security, medicare, and medicaid. As dmdNJ says, “people need to start taking responsibility for themselves and their families.” Relinquishing individual responsibility for retirement income and healthcare planning and charitable giving in favor of government control is and always has been a prescription for disaster. That $54 trillion hole is my proof.
The Ominous Parallels
Gold and Liberty
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