Stop the Posturing and Fix the Problem

I was listening to the radio while driving home Monday evening. One of the news readers teased the opening of the national news segment with breathy excitement announcing a discussion of the “winners and losers” in the recent debt ceiling debate. Unwittingly, this gentlemen – lacking any insight as to what he was reading – encapsulated the very essence of what has transpired over the last several months.

This was not an effort to find a solution to a real and growing problem. This was an effort to create talking points for the next election. Big numbers have been tossed around about the magnitude of each sides undertaking but all of the numbers were just smoke and mirrors for one simple reason.

None of the plans advanced – not by President Obama (well he never actually advanced any plan, he just criticized others), not by Sen. Reid (even though he finally conceded that tax increases would not be part of a plan), not by Sen. McConnell who just kicked the problem down the road), not by Speaker Boehner (even though he talked tough when forced to by the conservative members of his caucus) and most assuredly not by Rep. Pelosi (who can never really get beyond bumper sticker patois) – actually addressed the problem.

Only in Washington can people crow about “reducing the debt by $2.4 Trillion when they in fact put the nation on track to increase the national debt by nearly $10 Trillion.

Look, this isn’t rocket science. A welfare state is not sustainable. At a point in time the cost of the myriad of welfare programs exceeds the available resources. Have we reached that point in America? According to an article in Tuesday’s Wall Street Journal, the national debt now equals the Gross Domestic Product (GDP). For those of you forced to endure an education in the Portland public school system, the GDP represents the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. That’s it. Today in America, the federal government, even before the latest $2.3 Trillion increase in the debt ceiling, owes more than it produces.

To provide some perspective, let’s look at the ratio of debt to GDP for some other nations:

Japan – 225% – the Lost Decades of Japan continue.

Greece – 144% – A soft default has already been announced and experts expect a hard default to follow

Italy – 118% – Experts expect Italy and Portugal to be the next European nations to fail.

In contrast some of the nations where lower ratios represent the growing economic giants of the world.

China – 17.5% – because of our failure to address the debt problem, China is likely to become the dominant world economic power.

Russia – 9.5% – the heart of the Soviet Union and the hallmark of the failures of socialism now lectures America regarding its slide towards a welfare state.

Germany – 78.8% – virtually the whole of European Union now rests on the economy of Germany.

All of the big talk about reducing the deficit is just that – “big talk.” Every plan offered back loaded the reductions to a time beyond the current Congress knowing full well that one Congress cannot bind another and the reductions will never occur – just like promised reductions of the past. It is not clear yet what the impact of the debt ceiling deal will have on the 2012 budget but estimates range from $6 Billion to $61 Billion. Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget described it as “spit in the ocean.”.

The fact of the matter is that the country cannot deal with the fiscal crises unless and until it is prepared to deal with the welfare state. Social Security is unsustainable. It is a program that was created based on an actuarial assumption that the average person would not reach the age of eligibility. While minor changes have been made to the age of eligibility, Americans have experienced a dramatic increase in their longevity. Add to that the fact that a succession of presidents and congress spent all of the money in the so-called Social Security Fund.

The Medicare system was designed to slow the growth in the cost of treating seniors but adding drug prescriptions and failure to adjust the eligibility age ensured that the program would grow beyond reasonable sustainability.

Medicaid, like every other welfare program, has been abused by expansion of eligibility, a refusal by government to police eligibility and a massive influx of illegal aliens. The cost of these programs is not only a massive federal burden but is also driving state governments to edge of bankruptcy.

Not even robust economic growth and job creation is sufficient to bring the welfare state back into an affordable condition. It is not sufficient to say, “it’s the economy, stupid.” You must also add, “it’s also the welfare state, stupid.”

But, it’s business as usual in Washington. The ink was hardly dry on the debt ceiling plan before Mr. Obama rushed to the microphones to note that this was only the first step and then playing his favorite class warfare card, announced that “we aren’t going to balance the budget on the backs of those who have borne the brunt of this recession.” Mr. Obama may have graduated magnum cum laud from Harvard Law School but he remains studiously ignorant of the realities of economics. You cannot address the problems of America’s welfare state without impacting the recipients of welfare. To do otherwise will simply hasten the looming collapse of America’s economy. Wall Street understands that – in the aftermath of the crowing in Congress about passing a debt ceiling plan, the market’s decline accelerated to its worst day in years.

Mr. President, stop the rhetorical flourishes and lead. If you will not or cannot, get the hell out of the way.