The current budget talks are stalled again in a quagmire of political paralysis over how to address the federal deficit and revenues with no compromise in sight. Yes, a stop gap measure will be passed. The “status quo” is still the norm with no real honesty, transparency, or true dialogue with the public about the nature of the crisis. The Social Security Trust Fund ran a deficit in 2011 and 2012, and its reserves are not fully funded as everyone believes they are. Plus, the Federal Reserve is buying U.S. debt through “quantitative easing” which is really the Federal Reserve buying back its own debt to infuse more money into the economy. The deficit and interest to support it continue to grow. A quick summary of the federal deficit are given in summary:
Federal deficit (as of Dec. 31, 2012) = $16.354 trillion; 2009 deficit = $1.413 trillion; 2010 deficit = $1.293 trillion; 2011 deficit = $1.300 trillion; 2012 deficit = $1.089 trillion; 2013 projected deficit = $1.000 — 1.300 trillion.
Interest rates are at an “all-time” low, and the debt service is remaining relatively flat at this moment in time. But, what if the U.S. Treasury can’t keep interest rates low, inflation creeps in, and interest rates have to increase to sell our U.S. treasury bonds. If there is no effort to reduce spending with some increase in revenues, then you know what is going to happen ... draconian cuts and a complete financial catastrophe.
In March 2008, I sent a letter to my entire Utah congressional delegation, Senate Majority Leader Harry Reid, and House Speaker Nancy Pelosi (right before the housing meltdown and financial banking collapse). At that time I asked for fiscal restraint. Well, we know what transpired since then with more spending to bail out the banks and to stimulate the economy. A lot of that mess was our own fault. Many of us bought homes that we could not afford, banks made loans without a down payment, real estate speculation drove up housing prices in an artificial market, and many homeowners leveraged their homes with second mortgages.
Now, another four years have passed with $5.099 trillion in deficit spending, and where are we in the overall game of economic recovery? Nothing has changed and the deficit is unsustainable. We are not going to grow out of this deficit with the current economic indicators. The federal deficit is subsidizing our “standard of living” and is giving us a false economy and sense of security. This is not right!
I ask for leadership in Washington D.C. in speaking the truth at our National Capitol and to make some proposals that will bring a “new beginning” to this fiscal insanity. A few suggestions are given for consideration by our congressional leadership:
1) Reinstate the Social Security Payroll Tax Reduction — done on Jan. 1, 2013!
2) Freeze federal spending for all departments and make cuts across the board.
3) Adjust the automatic Social Security COLA based on a means test for recipients.
4) Address entitlements for the long-term — retirement age and overall benefits vs. co-payments. There must be reduced benefits!!
5) Consider an increase in the federal fuel excise tax to fund highways, mass transit, and ports/rivers improvements (it has not been raised since 1994).
6) Consider other user fees that could be allocated to support needful programs, but don’t ask for more income taxes.
7) Make changes in the Federal Code to provide for a more equitable tax burden for all taxpayers.
The Obama administration and Congress need to take a balanced approach to the budget. There have to be cuts in entitlements with some new revenues. We all understand that taxing the rich will only get us so much money ($100 billion — $150 billion a year), and that is not going to balance the budget. PresidentObama and the Democrats are going to raise taxes on not only the rich, but on all of us! It is inevitable with the Affordable Care Act, a “value added tax, etc.
The president and Congress must step forward and demonstrate the leadership that will work towards a solution that is based on fairness, sound fiscal principles, and making some hard choices. I will be retiring in the near future and things are not looking so good.
We can’t keep kicking the can down the road!
Cooper Jr., Ph.D., P.E., a civil engineer, lives in Roy. This column was sent to the entire Utah congressional delegation, Senate Majority Leader Harry Reid, and House Speaker John Boehner.