Guest Columnist - Ralph B. Everett, Esq.
Esq | , Ralph B. Everett | 8/17/2011, 9:28 a.m.
A Balanced Approach Will Lead to America's Prosperity
Despite what many of us may wish, the political argument over the federal budget and the future direction of our nation's fiscal policy has not been settled, but rather has merely wrapped up an initial phase with the agreement reached in Congress.
Still to be decided is how to reduce the nation's debt by another $1.5 trillion, which is a matter to be decided through a process involving a bi-partisan Congressional "Super Committee" this autumn. With a voluntary government default having been avoided, the next stage of debate will be played out under the threat of across-the-board program cuts being automatically deployed, if agreement cannot be reached.
On the block will be military and key domestic programs, raising the specter of deep budget cuts that many would find intolerable.
Interestingly, the recent debt ceiling agreement extends simultaneously with the expiration of the Bush-era tax cuts and just after the 2012 general election. And the Super Committee may be able to find a way to postpone the real debate on revenue-raising until then, as well. But decision time is coming.
When they were enacted a decade ago, the Bush tax cuts promised to increase prosperity for all Americans - creating new jobs, generating new wealth, opening new opportunities. And, for a while, they did. After all, it was a stimulus program. But its proponents knew that the cuts would reverse the contemporary trend toward federal budget surpluses and return the government to deficit spending. Indeed, that's why the expiration provision was included - otherwise the projected deficits would have been indefinite and politically less palatable.
We know now that the fiscal policy enacted back then brought us to no good end, ushering in the collapse of the economy in 2008 and the need for further stimulus to stop the hemorrhage. Over the past 10 years, the country has spent more than $300 billion just servicing the debt created by the cuts. Far from paying for themselves with increased economic activity as initially promised, the tax cuts have been a major cause of the enormous deficits we face today.
Meanwhile, tax collections have plunged to their lowest share of the economy in 60 years.
There are important considerations the Super Committee must address to avoid another recession that would be an even greater strain on the middle class. (We already know how challenging it is for vulnerable populations). During the last recession, three out of four workers reported that they live paycheck to paycheck. Family debt soared, housing values dropped and education cost skyrocketed. There were 8.6 million uninsured adults age 50-64 in 2009, up from 7.1 million in 2007. From 1999 to 2008, health insurance premiums increased nearly four times faster than increases in wages and overall inflation.
While any automatically-triggered spending cuts would be divided evenly between defense and non-defense spending; there are also protections for Social Security, Medicaid, and other entitlement programs. This is fortunate, as there will be a growing need to rely on Social Security and Medicare while these programs are being threatened with cuts. While Medicare could be exposed to cuts if the trigger is used, cuts will be to provider payments, not to actual benefits.