FSB Author Article
Playing
Roulette With the Country's Future
By Scott Bittle and Jean Johnson,
Authors of Where Does the Money Go? Rev Ed: Your Guided Tour to
the Federal
Budget Crisis.
A new and updated version is due out in January. Find out more at PublicAgenda.org
There's
something about playing roulette that makes everyone feel a little
like the uber suave James Bond. You can picture the actor of your
choice (we're not doctrinaire here), but they all make gambling
seem glamorous. Not knowing exactly what will happen adds an
agreeable tension to the drama. A clever screenwriter has labored
long and hard to insure a satisfying outcome. Casablanca makes
roulette alluring too. Remember when Rick steps in to fix the results
so a dewy-eyed ingénue and her husband win enough money to
escape
the Nazis? It's one of the best scenes in the movie.
The problem is that things don't always work out so nicely in real life - - and rarely does anyone step in to fix a game of roulette in your favor. That's why it's so disturbing to see the country's leaders playing roulette with the country's economic future by procrastinating on tackling our massive debt and budget problems.
Basically, they're betting that the government can continue to spend more than it takes in, because people around the world will be glad to keep lending to us by buying our Treasury bonds. In the short term, it's not a bad bet. Given the world's shaky economy, the U.S. government is still a better investment than most.
And in the long run? As David Brooks so succinctly puts in, "The bond markets are with you until the second they are against you. When the psychology shifts . . . the shock will be grievous: national humiliation, diminished power in the world, drastic cuts and spreading pain." 1 FDIC chair Sheila Blair, who certainly knows a thing or two about what happens when investors lose confidence, warns of danger too: "Financial markets are already sending disquieting signals," she recently wrote.2
It's no secret that the most bipartisan position in Washington has been the determination of both parties to live beyond our means for decades. And outside of government, public frustration is high, but realism remains low.
On the right, the Tea Partiers furiously demand that government get dramatically smaller, slashing spending by huge amounts to balance the budget now. Some even argue that Congress should slam the brakes on borrowing overnight, by refusing to raise the government's debt ceiling. The Tea Partiers rage against the machine, but seem unprepared for any frank discussion of how the federal government really spends its money, or the human consequences of its ideas.
But even if the Tea Party's champions in Congress could get their agenda through - - and governing is considerably balkier than complaining and criticizing -- such a sudden lurch into smaller government would be wrenching. And refusing to raise the debt ceiling could be disastrous. Tens of thousands of federal and state workers would lose their jobs in the middle of the Great Recession. Schools and colleges around the country would face massive cutbacks. The global bond markets, already nervous about the debt crisis in Europe, might start dumping U.S. bonds as well. The right likes to slam big government entitlement programs like Social Security and Medicare, but there are millions of human beings depending on them. You don't make major changes in these programs overnight.
The situation on the left is as just as bad. Despite careful, non-partisan assessments from multiple analysts inside and outside government detailing Social Security's shaky future funding, there is a profoundly disingenuous mantra coming from some progressives: "Don't worry. Don't touch it. There's no serious problem. The Trust Fund is good until 2037."
Yes, but Trust Fund is filled with government bonds, and Social Security will start drawing on the bonds in about five years. Those bonds guarantee that Social Security benefits are first in line when the government pays its bills - - people will get their checks. But that money has to come from somewhere, and the government's own auditors say the only way to do that is by raising taxes, cutting other spending, or borrowing from someplace else. In other words, something else in the budget has to give.
Do progressives really believe the country will suddenly be flush enough to cover Social Security and still pay for all the other spending these very same progressives want? And by claiming there's no problem, they undercut public backing for the ideas they do support, like raising the income cap on Social Security taxes. Why would people want to raise Social Security taxes on anyone if there's no problem?
There's a reasonable discussion about how quickly to move to bring the country's spending in line with its revenues given how weak the U.S. economy is. Huge, abrupt program cuts, big sudden tax hikes, pulling the plug on infrastructure and educational spending that is crucial to having a competitive economy down the road - - these are all risky, both economically and socially. Boring old long-term planning and gradualism are probably the only sensible ways out. But there is no time to delay on starting a reality-based discussion.
A recent Public Agenda survey of Washington insiders - - people whose careers revolve around the federal government - - showed that a whopping 8 in 10 agreed that the only way to solve the country's federal budget problem is to combine spending cuts and tax increases. Why don't these people step up to the plate and say something? Largely, they're silent. Meanwhile, we have profiles in cowardice in Congress and relentless volleys of self-serving spin coming from both the left and the right.
The trouble with roulette is that the house nearly always wins, and players who don't know when to quit lose their shirts. What American needs now is leadership that understands when it's time to leave the roulette table and leave the gambling to others.
1 The New York Times
© 2010 Scott Bittle and Jean Johnson, authors
of
Where Does the Money Go? Rev Ed: Your Guided Tour to the Federal
Budget
Crisis. The problem is that things don't always work out so nicely in real life - - and rarely does anyone step in to fix a game of roulette in your favor. That's why it's so disturbing to see the country's leaders playing roulette with the country's economic future by procrastinating on tackling our massive debt and budget problems.
Basically, they're betting that the government can continue to spend more than it takes in, because people around the world will be glad to keep lending to us by buying our Treasury bonds. In the short term, it's not a bad bet. Given the world's shaky economy, the U.S. government is still a better investment than most.
And in the long run? As David Brooks so succinctly puts in, "The bond markets are with you until the second they are against you. When the psychology shifts . . . the shock will be grievous: national humiliation, diminished power in the world, drastic cuts and spreading pain." 1 FDIC chair Sheila Blair, who certainly knows a thing or two about what happens when investors lose confidence, warns of danger too: "Financial markets are already sending disquieting signals," she recently wrote.2
It's no secret that the most bipartisan position in Washington has been the determination of both parties to live beyond our means for decades. And outside of government, public frustration is high, but realism remains low.
On the right, the Tea Partiers furiously demand that government get dramatically smaller, slashing spending by huge amounts to balance the budget now. Some even argue that Congress should slam the brakes on borrowing overnight, by refusing to raise the government's debt ceiling. The Tea Partiers rage against the machine, but seem unprepared for any frank discussion of how the federal government really spends its money, or the human consequences of its ideas.
But even if the Tea Party's champions in Congress could get their agenda through - - and governing is considerably balkier than complaining and criticizing -- such a sudden lurch into smaller government would be wrenching. And refusing to raise the debt ceiling could be disastrous. Tens of thousands of federal and state workers would lose their jobs in the middle of the Great Recession. Schools and colleges around the country would face massive cutbacks. The global bond markets, already nervous about the debt crisis in Europe, might start dumping U.S. bonds as well. The right likes to slam big government entitlement programs like Social Security and Medicare, but there are millions of human beings depending on them. You don't make major changes in these programs overnight.
The situation on the left is as just as bad. Despite careful, non-partisan assessments from multiple analysts inside and outside government detailing Social Security's shaky future funding, there is a profoundly disingenuous mantra coming from some progressives: "Don't worry. Don't touch it. There's no serious problem. The Trust Fund is good until 2037."
Yes, but Trust Fund is filled with government bonds, and Social Security will start drawing on the bonds in about five years. Those bonds guarantee that Social Security benefits are first in line when the government pays its bills - - people will get their checks. But that money has to come from somewhere, and the government's own auditors say the only way to do that is by raising taxes, cutting other spending, or borrowing from someplace else. In other words, something else in the budget has to give.
Do progressives really believe the country will suddenly be flush enough to cover Social Security and still pay for all the other spending these very same progressives want? And by claiming there's no problem, they undercut public backing for the ideas they do support, like raising the income cap on Social Security taxes. Why would people want to raise Social Security taxes on anyone if there's no problem?
There's a reasonable discussion about how quickly to move to bring the country's spending in line with its revenues given how weak the U.S. economy is. Huge, abrupt program cuts, big sudden tax hikes, pulling the plug on infrastructure and educational spending that is crucial to having a competitive economy down the road - - these are all risky, both economically and socially. Boring old long-term planning and gradualism are probably the only sensible ways out. But there is no time to delay on starting a reality-based discussion.
A recent Public Agenda survey of Washington insiders - - people whose careers revolve around the federal government - - showed that a whopping 8 in 10 agreed that the only way to solve the country's federal budget problem is to combine spending cuts and tax increases. Why don't these people step up to the plate and say something? Largely, they're silent. Meanwhile, we have profiles in cowardice in Congress and relentless volleys of self-serving spin coming from both the left and the right.
The trouble with roulette is that the house nearly always wins, and players who don't know when to quit lose their shirts. What American needs now is leadership that understands when it's time to leave the roulette table and leave the gambling to others.
1 The New York Times