Has the Government Forgotten About our Future?
By Ben Artz
The economy has fallen off a cliff. The Oracle of Omaha, Warren Buffet, proclaims this bad news after a rare bad year for his company and a similar year for his personal wealth. Just a week earlier President Obama suggested that we not pay attention to plunging stock prices as they tend to fluctuate wildly and have no real consequence for those who look for long-term gains.
Though they disagree on the significance of the stock market, both Mr. Buffet and President Obama have something in common; they are attempting to look beyond the current crisis into the future. Mr. Buffet is no doubt hedging his bets and doing all he can to protect his current and future wealth. President Obama it seems is doing nothing of the sort for the future wealth of the country.
Even before President Obama began proposing stimulus plans and spending bills to “fix” the economy, expert groups such as the Congressional Budget Office and the Federal Reserve were estimating the recession would end and a recovery would begin as soon as late 2009. Even so, the Federal Government successfully borrowed against future wealth to pay for a recession fix today, including billions of dollars on projects many think are wasteful.
This week hundreds of billions more are being proposed in a spending bill laden with earmarks, dozens of billions are helping shore up the tanking housing market and a new TARP plan will most likely be announced soon and could reach one trillion dollars. At this point the proper question to ask is, “Mr. President, when do you stop focusing on the present and instead start assisting the future?”
Economists agree that sustained economic growth relies on significant capital investment, technological gains and education improvements. To his credit, the President is trying to reach these lofty goals. However, he must not ignore the enormous cost of too much borrowing to pay for these goals. Every year the government must make interest payments to maintain the massive national debt. As the debt is certain to swell to levels approaching GDP, these interest payments swell along with it, although current borrowing by the government is nearly free. Indeed last year the government paid over $400 billion in interest alone.
The debt continues to grow in size even as the largest challenge to face this country’s future has yet to be resolved. Entitlement spending is set to increase to new heights as the remainder of the baby boom generation retires over the next ten years. In fact, the Congressional Budget Office projects the debt held by the public will increase 61% by 2019. The government must act now and consider the future if it is to curb the unrelenting and enormous deficits Social Security and Medicare will certainly create.
Households have already started to look toward the future. In January they saved five percent of their disposable income, a proportion this country has not seen in decades. Generally households tend to save more when the future looks bleak. Unfortunately, they may be right. The government will be forced to heavily tax households and firms alike in order to maintain an enormous national debt and also support a large retiring segment of the population. Both President Obama and Congress must begin taking cues from households and look to managing a budget that hinges on spending restraint and entitlement reform. Strong forward looking policies constitute the true hope and change that Americans want. The Government has yet to deliver.
-March 12, 2009