President Obama has to maneuver his way through a lot of constituencies, including Democratic senators and congress members, his own staff, and special-interest groups. Underneath it all, he may actually be a fiscal reformer. If he enacts major fiscal reforms, he will have one indispensable constituency on his side: public opinion. Ask the American people, and they will tell you overwhelmingly that our sustained fiscal health is fundamentally important.
[Read more...]What the Past Tells Us
February 8, 2010 By Leave a Comment
Perhaps because we are a young country, Americans tend not to pay much attention to the lessons of history. Well, we should start, because those lessons are brutal. Power, even great power, if not well tended, erodes over time. Nations, like corporations and people, can lose discipline and morale. Economic and political vulnerability go hand in hand. Remember, without a strong economy, a nation’s international standing, standard of living, national security, and even its domestic tranquility will suffer over time.
[Read more...]America 2030: Why We Must Act – Now
February 1, 2010 By Leave a Comment
Those of you who are parents (and I’m a parent) may want to reject out of hand the idea that we are in effect stealing from our children’s future and bequeathing to them a far less prosperous life. But if we don’t begin to address our fiscal challenges soon, it’s only a matter of time before the consequences begin to show up, most likely starting with higher interest rates. As things get worse, our children will slowly see their living standards decline. We can still prevent these things from happening. The ultimate goal of cleaning up our fiscal policy is not to avoid a recession or even to balance the budget per se – it’s to pass on the kind of healthy, vibrant nation that we inherited.
[Read more...]The Scary Budget Numbers
January 25, 2010 By Leave a Comment
The recession and attendant financial shock appear to be easing as I write this. But in Washington, financial imprudence is part of the fabric of government. You can see that in a single document that gets updated every year: the US budget. In putting together the budget, the president and Congress set our national priorities and allocate resources among them. The results have been pretty consistent. Over the forty years ending in 2008, revenues have averaged about 18.3 percent of our economy and spending has averaged over 20.6 percent, resulting in an average deficit of about 2.4 percent.
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The Trust Fund Con
Social Security is in trouble. According to the Social Security Trustees Report, the Social Security program was in a $7.7 trillion hole as of January 1, 2009. That means Washington would have needed $7.7 trillion on that date, invested at prevailing rates, to deliver for the next seventy-five-years on the promises that the federal government has made. But we actually need much more than that to keep Social Security healthy, because it will experience larger and larger deficits both in the near future and beyond the seventy-five-year accounting horizon. As of January 1, 2009, that number – the amount we would need to invest to ensure the sustainability of the program for seventy-five years and beyond – was $15.1 trillion. How much of this huge sum do we have invested in real liquid and transferable assets today – that is, how much in actual money? Zero, zip, cero, nada, nothing!
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