CLARKONOMICS: As Washington continues to fiddle on the issue of raising the debt limit, does that mean America burns? Entitlement spending is at the heart of the wrangling in D.C. and I want to discuss my radical position on what we should do about it.
Addressing the problem
First off, the drama in Washington about raising the debt limit is something of a manufactured crisis. There’s no reason why what we’ve done routinely through the decades by raising the federal debt limit is not being done now. Yet on the other hand, there’s a very good reason to draw a line in the sand.
We have something we have to face in this country. Yet with few exceptions, the politicians are talking in code words instead of facing the situation head on. And in doing so, they’re ignoring the core of what’s happening.
The core is this: Sometimes demographics are looked at as destiny. We have an aging population with enormous medical costs. What we spend on health care is roughly double what any other developed country spends — and we don’t have the benefit of increased life spans to show for it.
Medicare and Medicaid are more problematic than Social Security is in this overall equation. But taken collectively, these three represent the Super Bowl, the World Series and the NBA Championship all rolled up into one. Or any other sports analogy you want. How about game, set and match?!
The various plans you hear being bandied about like $1.7 trillion or $3.6 trillion or $2.8 trillion over this, that and the other length of time are all just numbers that don’t amount to a hill of beans if we don’t deal with entitlements in the United States.
The possible solutions
My preference is for a radical approach to problem of entitlement spending: No health care through employers or the government. Health care should be purchased by individuals, if they wish. People of lower income or the elderly should receive a voucher to help subsidize the purchase. Paul Ryan of Wisconsin is the person with a plan that’s closest to what I’d like to see.
This kind of plan would require a complete rewrite of the social contract in America, but it would do a lot to make us more competitive in the world. It would also mean that individuals would face more responsibility for their own health care. Yet it would ultimately reduce how much of our economy is siphoned off into inefficient health care sector.
Of course, Ryan’s plan is not the only one out there. The other alternative is that the government increases its role in healthcare and taxes rise to cover that.
The middle option between those two extremes is what the political parties have been wrangling about over these last many weeks. But the truth is both parties are talking in slogans and generalities. What we need instead is to be honest with each other and lay the cards on the table because we face very tough choices. The promises our government has made can’t be kept and we must figure out how to handle that.
The one thing we should not and cannot do is borrow money to cover what we don’t have. Borrowing weakens us greatly and leaves our preeminent role on the world stage open to challenge.
No matter how this is all settled, the one thing I will say is that we have to stop living on borrowed money. In our own lives, we are expected to pay our bills and we should require that government does the same.
States are living laboratories
The states are living laboratories because they’re required to balance their budgets each year, unlike the federal government. That’s created a situation where this is playing out very differently around the country from state to state. Perhaps the most stark example can be seen with two neighboring states, Wisconsin and Illinois.
After a bitter partisan divide, the state laws in Wisconsin were changed to reduce ongoing state and local spending. By contrast, Illinois decided to raise taxes by a substantial amount. So each state is taking its own path.
My belief, though, is that if you want to do something about economic growth, you have to reduce the role of government in the economy. Yet I am not one of those people who consider government to be evil. I do not subscribe to Grover Norquist’s extreme position of making the “government small enough that you can drown it in a bathtub.”
I believe there are legit purposes and reasons for government to exist. And it’s a natural occurrence that government grows. Nor is it just the usual suspects that are growing the government; lots of companies have their hands out for various forms of corporate welfare, just look at the tax code!
The truth is that we the people have to decide how strong a nation we want to be and how we’re going to pay the bills.
Any politician can get up and hit all the applause points about reducing the size of government and making it more efficient. But if you don’t make the hard choices about how to reduce the role of government in things that are popular with a lot of people, you don’t attack the big dollars of the budget.
You can sloganeer all day long, but we have to face consequences. We have borrowed and spent money we didn’t have. The time comes we have to pay the bills. If you pay them sooner, America remains stronger. To wait is to weaken us, on the other hand.
I believe that American citizens, if given the straight story, will make wise decisions. Enough of the slogans, it’s time for actions. And the action we need is a path that keeps America strong and puts the decision back in our laps as individuals.