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As Long as We Remember...

July 26, 2011

A Path to Financial Stability

Farrell Keough

Our nation faces serious deficit-debt negotiations – something we are seeing on the state and local levels as well. The outrage, (feigned or real) in the recent Board of County of Commissioners is evidence of events yet to come. It is likely our national leaders will not come together before August 2nd to determine a remedy.


Numerous steps have been taken to offer solutions – in April, both the Ryan Plan as well President Obama’s speech on our economy were presented. The Ryan Plan was roundly beaten back in the U.S. Senate as too draconian and the Congressional Budget Office Director Doug Elmendorf, noted of the presidential speech: “We don't estimate speeches. We need much more specificity than was provided in that speech for us to do our analysis.”


We now have the Republican Study Committee, Cut, Cap, and Balance proposal as well as the Gang of Six attempt at bipartisanship. It is likely the Republican Study Committee proposal will go the way of the Ryan Plan. So, at this point we are left with Gang of Six proposal.*


While numerous experts and well-respected editorialists have embraced this proposal, truth be told, there are virtually no specifics to be offered. Generalities like savings to various programs through efficiencies will not occur due to governmental and political inertia.


For instance, here is a snippet of the paper outlining what is actually contained within this proposal.


• Require the Budget Committee to report legislation within six months that would:


• Extend discretionary caps and enforcement mechanisms through 2021.


• Ensure Congressional action to reduce the deficit if the debt-to-GDP ratio after 2015 has not stabilized.


• Review total federal health care spending starting in 2020 with a target of holding growth to GDP plus one percent per beneficiary and require action by Congress and the President if exceeded.


• Achieve program integrity savings of $26 billion in entitlement programs to curb fraud, abuse, and other wasteful spending government-wide.


• Create a working group to provide updated budget concepts for CBO and OMB.


Without specifics, the various committees’ overseeing these programs will either allow the status quo to continue, pretend to make cuts, or simply allow public outrage to carry the day rather than standing forward as the leaders they were elected to be.


In a very simplified version, we got to this point by falling asleep. After World War II, the major gain the United States of America enjoyed was that our dollar became the standard for all other currency throughout the world. As time went by, we relied more and more on debt and credit. President Richard M. Nixon took us off the gold standard and our national and international monetary system became completely dependent upon debt as its backing. This ponzi scheme worked for decades until the bottom finally fell out of the housing market and all other markets soon followed.


Generations have known very little of savings and we have become more and more dependent on government programs. Turning this tide is far more than convincing a percentage of the voting public that we must discontinue what we have become dependent upon – we must determine how to replace these programs.


For instance, Medicaid, Medicare, and Social Security are the three biggest entitlements offered in this nation – constituting approximately two fifths of our entire spending. But few understand that these programs are forward funded, meaning the next generation covers the costs for the current recipients. With birthrates of legal American taxpayers dropping, this means fewer people to cover the costs. Couple this with longer life expectancies and the recipe for default has been completed.


In other words, we have fewer people paying in to cover the costs of an aging population. People beyond retirement have come to expect these programs to cover the costs in their limited budgets. In fact, the federal government requires retirees to utilize Medicaid Part B. This enforced dependency cannot simply be cut or ended without recourse.


But, if we continue to spend on credit, the entire system will fail.


A solution must involve weaning the population off these entitlement programs – continuing to pretend we can tax our way out or print more dollars to cover the costs is both irresponsible and simply a lie. As stated by British Prime Minister Margret Thatcher, “The problem with socialism is that eventually you run out of other people's money.” We have no alternative left but to face the facts and develop mechanisms to end these programs and shift responsibility back to the people.


This is why it is unlikely we will see genuine solutions presented.


The Gang of Six proposal has no specific cuts or detailed mechanisms to wean the public off these programs. Until we elect and embrace leaders who will forward methods to reduce our government and the myriad programs offered, our debt will only increase and our economy will not produce the level of income to pay these costs.


We must speak up and begin to embrace the statesmen and women who take the slings and arrows of the press and groups interested in supporting the status quo. We are seeing the future play out – to deny this truth is to allow not only our children, but this current generation to slip into poverty.


* An excellent synopsis of the proposal is available by clicking here or going to this website:


Woodsboro - Walkersville Times
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