As the presidential and congressional campaigns take on more momentum heading toward the nominating conventions and Labor Day, sugar-coated promises are filling the airwaves. It is easy for politicians to pander if they aren’t required to say how they plan to pay for the programs and proposals they set forth as temptations for the voters.
Perhaps we should keep a few facts in mind as Election Day nears. During the last two months, inflation has accelerated to a rate that would approach 10 percent on an annualized basis. That means the earning power of American workers is being eroded at a rate not seen in years. Rapidly rising commodity prices and government policies of pumping more “liquidity” into the financial markets are the main causes of the current higher levels of inflation. The federal government is doing nothing to rein in the inflation it is helping to create. As a consequence, the standard of living for most Americans is being reduced with each passing month.
For the month of June, the federal budget deficit totaled almost $110 billion. It is expected to stay at extremely high levels for the foreseeable future because the federal government continues to spend at a record pace while revenues can’t keep up due to the weakening of the economy.
The estimate of the Medicare and Social Security projected long-term shortfalls is $37 trillion. It is hard to envision how much money $37 trillion actually is. For comparison, consider that the current federal budget contemplates spending $3 trillion. That means that it would take the entire federal budget outlays of 12 years at the 2008 expenditure level just to balance the books for what we will owe in the future for two of the major entitlement programs. Consider the enormity of those numbers. If the federal government held spending to a net zero increase for the next 40 years or so (fat chance!), we would still be $37 trillion in the hole if we live up to the promises we have made to those who are retired or will be during that time frame. So how do we pay for it?
Don’t expect any politician running for office to attempt to answer that question. “Taxing the rich” is one proposal but doubling the tax on Americans who make $250,000 or more a year wouldn’t make a dent in the astronomical budget problems (and could add to the softening of the economy). To say that presidents and members of Congress have shown no interest at all in cutting the budget would be a classic understatement. Automatic cost of living adjustments, unchecked entitlements, earmarks, defense spending boondoggles, subsidies and bailouts rule the day in Washington.
The most likely answer to the question of “how do we pay for it” is a sad one. Those of us who are over the age of 50 won’t contribute much to the solution of the problem. At some point some of us might have to wait an additional year or two before we can collect Social Security, but for the most part, the problem will be passed on to our children and grandchildren. They will see their taxes go up, governmental services decline in scope and quality, and the national defense become increasingly more precarious.