Precipice Politics

So, I am sitting down with my wife to discuss a major life event – my employer just cut my overtime and has even threatened to start all employees on a four-day workweek. I guess it is just a sign of the times as the economy isn’t recovering and my company has just decided to be on the defensive and prepare for the worst. The problem is this has now put my family in jeopardy. We are living on the edge as it is. Lots of credit card debt, a full mortgage payment and demands from the kids as they are just entering high school.

The question is: What shall we do to keep our heads above water? Well, the obvious plan starts with trying to reduce our costs, wherever we can. Can we refinance the mortgage to a lower rate? Do we need all of those cable channels? Do we really need two cars? Should we cancel our planned vacation? Cut, cut, and cut!

Having made the long list of painful decisions my wife asks the obvious question: Is there any way we can replace the income you lost? How about getting another job that pays more? Perhaps we can both get part-time jobs? We discovered that just cutting our expenses never really closed the budget gap we had and that more income, in addition to the cost cutting, was needed to get us to zero.

This is the sort of discussion that has been taking place across America during our current recession. This is what families have to do. So an important question seems to be: Why is it that our government is not able to do the same? In a situation where the country is on the brink of collapse, why are politicians taking political positions? Why are they not putting every option on the table to solve this real problem? The answer is probably “politics as usual” but this time it is not enough!

The reason we are in this predicament as a country is that we cut the government’s income and drastically increased spending.  The Bush tax cuts have to date reduced government income by about $2.8 trillion and entering two unfunded wars (Afghanistan and Iraq) increased government spending by $1.26 trillion. In my simple mathematics, that equals around $4 trillion in the hole and still excludes the interest cost of financing these deficits. Then, as the economy tanked at the end of Bush’s term, the income side of the ledger dropped even more and to try and stop the rapid decline the Obama Administration decided to pump money back into the economy to stimulate it again, creating an ever bigger gap.

Now I am not an educated economist but I have run some of the biggest corporations in the telecommunications industry and have been faced with similar budget problems. In the corporate world, if your budget problems are caused by a fall in revenue then that is the first thing you try and fix. Not ignore it. Should we spend more on advertising so we can sell more product? Are our products price sensitive? Could we increase the prices to compensate for the income loss? Should we replace old and outdated products with those more desirable? Income, income and income!

If the income problems are not reparable then you are forced to cut expenses. In most corporations, expenses are carefully monitored and cost cutting options might be few and there are many expenses that are difficult to dispose of. You have to have accounting and legal advice, a building to house employees and basic administrative personnel. There is a certain point where cutting expenses can start to impact the very existence of the corporation and more drastic options may have to be pursued.

These examples are no different than the case before us of the US government coming to terms with its deficit problems. The only difference is that with the government, as always, the political games are being played. Getting rid of the causes of the initial problem would seem to be a first step. Reverse the Bush tax cuts to where they were before Bush took office and the government was enjoying a $900 billion surplus and close down the wars in Afghanistan and Iraq. What would be wrong with that? Go back to where we were before this became a problem. No deficits and a booming economy and very low unemployment.

That would seem easy right? Enter politics and a two-party system, which is totally polarized on many issues, and the problems begin. The Republican Party has a doctrine that wants to dismantle government wherever they can and hand over everything to private industry. The debt ceiling discussion has given them a tool to attack any form of government involvement and try and force a solution where the average Joe on the street is going have to sacrifice and they plan to enrich the wealthy even more. The people and corporations that fund their campaigns and the lobbyists who roam the corridors of power help “grease” the GOP machine to make decisions in their favor.

The main area for cutting that the GOP now focuses on is the “so-called” entitlements – Social Security and Medicare. For the first time in history the older portion of the population is facing major cutbacks to their very existence. Programs they have paid into for decades are suddenly not going to deliver on the things they were promised. The GOP is going to increase the retirement age to somewhere between 67 and 70, even though you cannot find a job past the age of 55. The monies we have paid into these two programs has been squandered by these politicians even though their own “entitlement” programs for retirement and healthcare are the best in the world. No pain there!

They have discovered they can take this country to the precipice called “the debt ceiling” which if ignored will destroy the United States into a status it will never recover from. They are willing to mix two totally different problems and hold everyone, the whole country, at ransom. The total US debt, which is money Congress has already spent, and the budget, which is a 10-year future problem. They are mixing the past and the future into one ultimatum and hoping they can blame the consequences on the Obama administration.

They are ignoring what any family or corporate management in the US would do – seek a balanced approach. Look at both the revenue and the cost side of this equation. Even the so-called wealthy have said they have no problem with going back to the tax rate levels they had under the booming Clinton years, but the GOP is insisting that they be protected and then proceed to try and cut social security and Medicare, programs that any normal American needs to survive in retirement. The facts speak for themselves. Letting the Bush tax cuts expire completely would raise more than $4 trillion in revenue and would solve more than 75% of this country’s debt problem over the next 10 years.

Just this single fact shows us where the debt crisis originated from. But a selfish Republican political dogma is taking the upper hand and with precipice politics is taking one of the greatest countries in modern history to the brink of disaster. They are trying to blame Obama for this problem but they ignore the fact that the President doesn’t write one single check – they do. It is Congress that creates the budget, it is the Congress that allocates the funds and it is the Congress that spends the money, not Obama. Maybe the drop-dead date of December 31 is irrelevant as the rest of the world watches and plans to extract its money from our vaults long before and long after this date. I ask this question: Would you entrust your money to the US Congress?

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