By Richard L. Kesner, President
The CommonWealth Group
The system is fabulous. It continues to amaze the rest of the world. Year after year we fight and squabble within ourselves. Every four years of the Presidential Election campaign Democrats and Republicans charge each other with fraud, incompetence and anything else. The great thing is that when it is over the country continues to grow and the system continues to work. I assume that once again the system will continue to work and grow no matter which party wins the White House next month. However, there are dangers on the horizon and it is important that these dangers be addressed immediately, or the dangers may be realized.
FALSE PROMISES
We as a nation are in trouble, and this year’s Presidential contest should have made this obvious for everyone. As we listen, see and read about the false promises from both parties there is much danger in the future, unless we as a country start to be responsible for our actions. This is not a political statement. It does not make any difference which party wins the White House, which candidate promises you like or dislike, but rather in fact, in the amount of the deficit and the budget shortfall. We are selling out the future of our children and grandchildren for the false promises made by politicians for the explicit purpose of gaining your vote. Both parties are to blame and both will continue to make these false promises unless we as a nation speak up and bring them to task. The problem is that time is running out. If we do nothing in the next four to five years to change the entitlements that we have been promised it will probably be too late for our children and grandchildren.
“You cannot strengthen the weak by weakening the strong.”
“You cannot help the wage earner by pulling down the wage payer.”
“You cannot help the poor man by destroying the rich.”
“You cannot help men permanently by doing for them what they could and should do for themselves.”
“You cannot keep out of trouble by spending more than your income.”
“You cannot establish security on borrowed money.”
The above statements are usually inaccurately attributed to President Abraham Lincoln. In reality the words belong to an obscure German-born, Brooklyn-ordained minister named William John Henry Boetcker, who wrote them in 1916 in his pamphlet entitled “Lincoln on Private Property.”
The problem is that our representatives are mortgaging our future for short-term promises. The last two of Mr. Boetcker’s statements are the most important for this point. Debt, the deficit and continual borrowing will someday cause the economy to fall like a house of cards.
THE AGING OF THE BABY BOOMERS
Today, the good news is that Social Security is running a sizable cash-flow surplus. This surplus covers the roughly equal cash-flow deficit of Medicare. However the future is bleak. If you look at Social Security and Medicare together, including both Medicare’s hospital and physician programs, they go from a modest combined cash-flow deficit of about $25 Billion to a cash–flow deficit in 2020 of $783 Billion. That is $783,000,000,000. These numbers do not include the newly passed Medicare Prescription Drug, Improvement and Modernization Act.
Unless the elected officials of both parties start to face the reality of the problem, the government will face severe options: either cut defense, education, transportation, criminal justice and other programs, or raise taxes, or both. It is estimated, according to the Social Security Administration, that in order to finance the increase in benefits for Social Security and Medicare through higher taxes, payroll taxes would increase 50% by 2020 and by 200 to 300 percent by 2040. Another part of the problem is that it is estimated that roughly one-third of all baby boomers have little or no retirement savings.
Another problem is our country’s continued dependence on foreign capital. This is another deficit which is not talked about. This so-called “current account deficit” indicates how much of our “birthright” we are selling off to foreigners, or promising to pay them in future interest payments. In 2003 the United States imported capital at the highest rate in history, about $4 Billion each day.
As we continue to increase these twin deficits, we continue to turn to other countries to finance our home mortgages, credit card balances, and the business investments that fuel our growth. If foreign investment stopped or was reduced we would have to increase interest rates to attract foreign investment and probably decrease the value of the dollar. This would cause the economy to stall in the short-term. The danger is that foreign investors would lose confidence in the dollar.
This could cause even more economic ramifications.
THE SOLUTION
We have to educate each other about what is at stake. There is no mention of these problems in the press, and the politicians will continually avoid the truth because currently it is political suicide. We need to reform the way Congress acts regarding budgets and spending and we need to hold them accountable for violating the process. When voters show concern, leaders start talking responsibly about our future. When concerned voters are informed, leaders, true leaders start taking action. This is the way to mobilize the country and create a nonpartisan consensus.
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