The Real Path to Prosperity

Posted on April 19, 2011 by JtowneJeff in Opinion

To many Americans, specifically those aligned with Tea Party values, the 2010 national elections were a referendum of sorts on Washington, D.C. Americans are tired of out-of-control spending, tax increases, government overreach, and ‘business as usual’ politics. Newly elected Republicans, primarily in the House of Representatives, believe that this is why they were elected: to reign in the out-of-control culture in the Capitol.

There has been a lot of media coverage of the current fiscal budget, 2011. Why was there not a budget in place? What took so long to compromise on $38.5 billion? But as the newly emboldened House Speaker John Boehner spent most of his time bickering back and forth with the president and with Senate Democrats, Rep. Paul Ryan has been working tirelessly to pen a budget proposal for fiscal year 2012. Ryan has dubbed his proposal the Path to Prosperity.

Ryan’s budget, which claims saving of more than $6 trillion over 10 years, is broken down into four major issues. The first area of government that the Path addresses is ‘efficient, effective and responsible government’, which is followed by reforms to Medicaid, and by reforms to Medicare and Social Security, and finally reforms to the tax code.

Since I’m no economist, I’ll spare you my interpretation of most of the numbers involved. Essentially, though, the Path avoids raising taxes in any way, as far as I can see. Rather, Rep. Ryan realizes the over-indulgent culture that is the Federal Government, and makes spending cuts in virtually every single federally funded program. He took the advice of Defense Secretary Robert Gates and cut $178 billion from the Defense Department’s budget, reinvested $100 billion of it, and applied the remainder to deficit reduction. His Path calls for complete repeal and defunding of the healthcare reform bill passed last year, effectively leaving us no worse off than we were in that arena. The Path calls for the remainder of domestic spending to return to 2008 levels, and a 10 per cent reduction in the federal workforce, and retooling their generous pension programs. By following Ryan’s Path, he says, we will reach ‘primary balance’ in 2015; that is to say, the only red ink in the budget would be interest on the federal debt. According to the CBO, however, it would be 2040 before this plan would actually start to pay off the principle of the federal debt. Finally, Ryan makes a soft attempt at reforming the Tax Code for simplicity sake, and caps the nominal tax rates at 25 per cent. Not bad, Mr. Ryan.

Conversely, President Obama’s original budget proposal for 2012 actually increases federal spending. However, the day following the release of the “Path to Prosperity”, President Obama gave a speech in which he outlined his own plan to reduce the deficit by about $4 trillion over the next 12 years. Obama staunchly defended only two key points on his plan: cuts to defense spending and tax increases. The president said he stands firm on letting the tax cuts for the ‘wealthy’, those earning in excess of $250,000, expire and not extending them. Aside from those talking points, sprinkled with some rather partisan rhetoric, President Obama shared very little as far as the details of his deficit reduction plan.

As of April 18, 2011, the United States’ National Debt is $14.284 trillion. That figure is a mere $10 billion and change shy of the Debt ceiling. Given the fact that America’s credit cards are effectively maxed-out, both of these plans do far too little, far too late. Keep in mind that the debt ceiling is the current maximum of total accumulated debt authorized by the same Congress that is now in a scramble debating the terms of increasing that ceiling. Had that Congress passed a budget last year, they would have known that this limit was approaching, and would have had several more months to work out a plan to address the issue. The fact that we have yet to see a serious, implementable balanced budget proposed for fiscal year 2012 is disheartening.

When my family budget starts to get tight, we sit down and figure out where we can save money and what we can do without. We clip coupons, we drive less when possible, we don’t eat out, etc. We might even look at ways to earn some extra money; work some overtime or do some side jobs. The same is true of any company or business. When Joe’s Cogs balance sheets are close to red ink, Joe spends a little less on advertising, he makes sure all the lights are turned off at the end of the day, and maybe he lays off the janitor and sweeps the floor himself. Depending on the market situation, he might even charge a few extra pennies for his product. But neither my family or Joe’s Cogs, upon realizing the possibility of a negative balance, decides to simply take out another loan or apply for another credit card.

But that is exactly what the federal government wants to do. And that is exactly what they’ve done for decades after decades. In fact, it has been over a decade since America ran an annual budget surplus. Can you imagine spending ten years digging a hole that your children would be born in? That is the exact scenario that has played out in Washington, D.C. over the past ten years. Rather than act like grown ups, the senators, representatives, and presidents that we have elected have become so addicted to power and the desire to be re-elected, that they have done nothing but placate people for the here and now. This debt is not a new problem, just a bigger one. America has had a ballooning debt since the late 1970’s, and each year that nothing is done, the problem is compounded.

Sadly, the politicians that we have charged with the responsibility of reducing this crushing debt either don’t understand how to do it, or would rather focus on re-election than do what they know is right. Since I have yet to hear a logical argument opposed to reducing the debt, I can only assume that the vast majority of Americans understand the gravity of the situation. Unfortunately, Republicans and Democrats can’t seem to get past the partisan name-calling and finger-pointing and do the adult thing. Both parties are to blame for America’s financial situation. The non-partisan Congressional Budget Office estimates a revenue total of about $2.6 trillion in fiscal year 2012. Maturity, prudence, and common sense would say that spending for the same year should not exceed that amount. Yes, a true balanced annual budget, what a novel idea. But neither Ryan’s plan nor Obama’s plan accomplishes that seemingly simple, common sense goal.

A true path to prosperity, a path that we can proudly lead our children and grandchildren down, involves some deep and painful cuts. There are literally countless programs that receive federal tax money that could easily survive without those funds, saving billions of dollars to the tax payers. Billions more can be saved by cracking down on waste and fraud in the disbursement of citizen money. Federal employees, especially politicians, are payed relatively large salaries and luxurious benefit and pension plans that could and should be considerably reduced. Foreign aid can be completely eliminated, at least until our debt is paid for. I don’t have a problem helping countries in need as long as we can afford to do it and those countries use the aid responsibly. The entitlement programs are probably the biggest leaches contributing to the debt, and they need to be reformed or eliminated at the federal level. Medicare, Medicaid and Social Security are unsustainable in their current forms. Food stamps, housing assistance and unemployment assistance should all be handled on a state and local level, with no federal funding for those programs at all. These common sense adjustments, and likely a few others that I missed, will put America back on track. But they will all be painful. It is likely that every single citizen will be effected by these changes, and prudence and a sense of responsibility will help to keep the pain to a minimum. But the pain is necessary. Our national debt is a cancer that has metastasized and must be removed as quickly as possible, or America will not be on a path to prosperity, but on a path to ruin.

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