March 27, 2003
While coalition forces fight along the banks of the Euphrates to eliminate a danger to Western
civilization, a parallel battle is being fought in the corridors of the nation's capitol that
might have a lesser chance of success. While we'll know soon enough the consequences of the
military battle (sooner, perhaps, than some would like), the consequences of the current Battle of
the Budget won't come back to haunt us for years. And it's that distance of consequence which makes
it so hard to rally the troops for this one.
With the help of a few rational--um, moderate--Republicans, the Senate Democrats have managed
to halve Bush's proposed ten-year tax cut of $726 billion to $350 billion. That's a $376 billion
victory for fiscal restraint that, even if it survives compromise with the House's budget plan
(which it won't), would be just a small nick out of the cancerous growth that's the federal debt.
As it stands, the Congressional Budget Office is projecting that the federal government's debt
level will approach $10 trillion (that's thirteen zeroes) in the year 2013. That
estimate doesn't include the proposed tax cuts, Bush's $75 billion request for war funds, or
his February proposal to set aside $400 billion for Medicare prescription drug coverage. While
those figures seem relatively small, every debt addition has a compounding effect when the
interest on that debt is tacked on.
The age-old argument that deficit spending is needed to provide stimulus to the economy never
quite cuts it, and certainly doesn't in this case. FDR's Depression-era deficits never pushed the
economy out of the doldrums; the Second World War did that. The Gargantuan debt created by
defense spending during that conflict is still with us today, only these days it's dwarfed by the
debts accumulated during the Post-War Era. The most recent deficit spending cited as a successful
example of Keynesian economics, Reagan's defense build-up in the early Eighties, probably had less
of an impact on the economy than falling oil prices. Whatever benefits that have been derived from
"stimulus" over the years have been greatly outweighed by the problems which heavy long-term debt
poses.
And the CBO's numbers don't even begin to account for the long-term challenges facing the nation.
The most certain challenge will be demographic: as Baby Boomers begin to retire en masse early in
the next decade, the federal government's Social Security and Medicare obligations will explode
unless something is done to change the current system of entitlements. In the year 2002, 35
million Americans were 65 and over, and the federal government laid out $706 billion in related
entitlements. In the year 2012, 37 million Americans will be 65 and over. In the year 2022,
51 million Americans will be over 65 and earning full entitlements if our current laws are
still in effect. Even before accounting for gains in human longevity over the next two decades,
one half again as many seniors will be taking Social Security checks and Medicare benefits rather
than generating tax revenue.
Another challenge, one which the nation is facing admirably, is the war on terror.
JFK wouldn't have remembered this war as a "long, twilight struggle": he was actually
referring to a struggle against "war itself", among other things, and the "twilight" metaphor
would erroneously imply an end. No, the war on terror will be a permanent
struggle, fought as long as the technology to wage terror exists. And it will be an expensive
conflict, requiring enormous expenditures for decades to come.
The cumulative effect of all these outlays will be a ballooning federal debt
that will eventually implode and take the federal government with it. Hard choices could be made, such as the
passage of a Balanced Budget Amendment (which would at least staunch the flow of red ink), but
members of the current two-party system are incapable of making hard choices. No, sometime during
the next twenty years the American government will be forced to adopt policies of extreme inflation
and/or default on its debt. Either action would destroy confidence in the federal government, and
perhaps destroy the government itself.
George W. Bush would do well to ensure the future of his daughters' generation by doing more to
emulate the example of his father. 41's balancing of the budget did much to lay the foundation
for the roaring economy of the late Nineties. Yes, his acquiescence in a small tax hike helped cost
him his Presidency, but the lesson to be learned from that defeat is to never paint yourself into an
ideological corner. The best leaders are those who are willing to make tactical compromises in
order to achieve strategic objectives. And the strategic objective of any President should be the
long-term good of the nation, not another term in the White House.
© 2003 W.R. Hammons
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written permission. If you would like to contact me, I can be reached at bill@wrhammons.com.
