Getting America out of Debt

It's Time to Get Out of Debt!

America looks like a rich nation. We have big cars, big houses, big roads, and a big military. But our balance sheets tell a different story. We paid for it with debt: credit card debt, student loan debt, mortgage debt, business debt, national debt… We are on the path to economic mediocrity, or even poverty.

The knowledge lurks in the back of our minds. We have the trappings of wealth, but the wealth is not buying us happiness. Pretentious sages claim that wealth beyond basic needs does not buy happiness. Their claim defies intuition.  A better explanation is this: much of our wealth is not real. Our illusion of wealth is based on debt. Debt begets uncertainty; uncertainty begets stress; stress begets unhappiness. To become a happier nation, we need to get out of debt.

The knowledge resides within the subconscious minds of our politicians as well. But most are in denial. The magnitude daunts. ‘Tis far easier to spend money tackling current crises and buying votes. And so our leaders will continue to run up the national credit card until We the People request otherwise. And we cannot simply say “balance the budget” while also demanding more defense, welfare, education, subsidies, pork, and tax cuts. Our politicians need more coherent instruction.

A Balanced Approach to a Balanced Budget

The problem is huge. The debt approaches the size of our economy, and the Baby Boomers are preparing to retire! Easier solutions might have sufficed decades ago. Today, we need to accept the hard solutions:

Taxes. They need to be higher. It’s too late for spending cuts alone. Discretionary spending for 2012 is $1.24 trillion (budget, page 198); the deficit for 2012 is about $1.1 trillion (budget p. 171). We cannot defend the nation and perform other constitutionally mandated tasks for $124 billion. Yes, we can trim entitlement spending over time, but we need to be running a budget surplus yesterday. The Baby Boomers are preparing to retire.

Real Spending Cuts. Higher taxes are not enough. Even at peak postwar tax levels (federal receipts/GDP) we would not have a balanced budget. We need to cut spending: both discretionary and entitlements.

Fortunately, our future is not all gloom and austerity, however. Toss out the failed traditions, stale talking points and economic pseudoscience; apply some eclectic thinking and creativity; and we find that opportunities abound. We can have better government for less. And by better I mean better for conservatives and liberals. We just need:

Accountability. Politicians talk about cutting “waste, fraud and abuse” yet they keep voting for more. Do not blame them. They cannot help it. The system is rigged. Turn down pork and special interest money and you lose office. If we want our politicians and bureaucrats to focus on the general welfare, we need to set a system which rewards such – or at least doesn’t punish good behavior like ours does now.

Efficiency. Reducing waste is not enough. And some vital government functions are difficult to privatize and unpleasant to live without. We need to perform some government functions better. And we can. We can defend the nation, promote democracy, fight terrorism, protect the environment, and uplift the poor far more efficiently. There will be plenty of ideas to keep both liberals and conservatives reasonably happy even as we get the government down to a size we can afford.

Jobs. We need more of them. If we lay off government workers through either cuts or efficiency, they will need private sector jobs. We’ll also look into higher paying jobs for the middle class. Higher wages means more net taxpayers, fewer dependents on government largesse. Unfortunately, one of the primary factors holding down middle class wages is the federal deficit. We have a Catch-22 situation to escape.

Economic growth. Economic growth is not going to get us out of our financial hole by itself, but it helps. We will look into how to get the economy going again, and how to do so without creating another financial bubble.

Financial stability. From the savings and loan bailouts, through multiple auto industry bailouts to the mortgage crises, the government has spent hundreds of billions bailing out big businesses. This money adds to the national debt, which in itself weakens the financial system. We will look into simple reforms of our financial system: simple regulations which separate capitalism from casino gambling.

Cut personal debt. The government encourages you to go in debt. Debt begets stress. Politicians offer to help, creating yet more government programs. Cynics claim the cycle is intentional. At times they are right, but often the problem is mere error. Our leaders spend too much time kissing babies and raising campaign funds to fully grok the consequences of their actions. The voters must tell them. And citizens who can should get out of debt despite government incentives.

Over the next year I will fill up this site with articles in all these categories. Some of the articles will be broad principles. Others will include hard numbers – as the banner indicates, I have a copy of the 2012 federal budget, including weighty appendix. I will provide more than enough ideas. Politicians can pick and choose.

But first they need to get out of denial. So the first articles will be debt counseling for politicians and political activists. Liberals need to learn that deficit spending is regressive. Conservatives need to accept the limits of the Laffer Curve and economic growth. Libertarians need to realize that we cannot have stable money without paying down trillions of public and private debt first. Greens need to grasp how deficit spending encourages short term thinking throughout the economy.

Motivation first. Action next. Stay tuned.