Let’s try a thought experiment. That is when you imagine a situation and then imagine an outcome or solution. Like wondering what would happen if we exploded a 1 million megaton atomic bomb or we imagined that all of our congressmen in Washington suddenly began making decisions that were in the best interests of the people. The experiment I want to try has to do with money. First we have to establish the conditions of the experiment.
To make this experiment useful, let’s imagine that the conditions of our imaginary experiment are as real as we can make so we’ll start by using our real national debt of $16.8 trillion and set it to grow at a rate of over $2 billion per day. We’ll use our actual government spending of about $700 billion more per year than it collects in taxes. (It does this by printing new money and selling bonds to other countries like China that buy these bonds because they pay an annual interest rate of about $400 billion.)
Now let’s use our actual economy with a higher unemployment rate than we would like and include the 74 million baby boomers representing a massive amount of corporate, business and technical knowledge, as well as an enormous earning capacity, retiring at a rate of nearly 15,000 per day. That will continue for the next 10 years. Now let’s imagine some possible scenarios that might actually happen.
Imagine that one of several economic tragedies happens. It could be a demand for payment of all those bonds by the Chinese. It could be a massive increase in Social Security and Medicare as a result of all those retiring baby boomers. It could be some international crisis that creates a high expense or lowers the value of our dollar. Whatever it is, let us suppose that the end effect is that more jobs are lost, salaries are lowered, corporate profits fall and the amount of taxes collected by the state and federal government takes a sharp dive.
Given our known and increasing commitments to fixed obligations (interest on the national debt, entitlement programs, etc.), in this scenario, the annual deficit will rise to well over $1 trillion per year and the national debt will quickly rise to a point that the interest payments will exceed our ability to pay it. In this scenario, it will be impossible to raise enough taxes to pay for all the things that the government owes.
We will go wild and imagine that even the Republicans in Congress will agree that spending will have to be decreased on a large scale. Decreases of 5 percent or 10 percent will be meaningless. Funding for entire programs, organizations, departments and across-the-board demographics will have to be seriously reduced or cut out entirely.
Now, here is your challenge of this thought experiment. What would you give up? What government service would you pay more for? What would you allow a candidate for political office to propose cutting and still vote for him? If a candidate said he would not allow or vote for any cuts or reductions, would you believe him?
For the purposes of this thought experiment, let us assume that these cuts cannot be avoided by any means and that no miracle or technological solution will come to our rescue. Conditions like the Great Depression of the 1930s is what is most likely to happen if we ignore this situation and take no action until it is too late. So, what would you do?
In 2005 there were 1,607 funded programs that totaled $1.97 trillion. This does not include an additional $500 billion from pork barrel projects and the cost of running the government itself — the salaries and other expenses of all of the employees and infrastructure of the government. That year, we spent a total of $2.47 trillion at the federal level — $318 billion more than was collected in taxes. (Remember, this was before the Great Recession that hit in 2008.)
I could list thousands of relatively minor government payouts — like the $345,000 paid by the National Science Foundation to construct a robot squirrel to find out why rattlesnakes don’t attack squirrels that wag their tails. The problem is that if we cut out all of the thousands of payouts funded for less than $1 billion, it would only reduce the total deficit by about 23 percent.
Remember, the deficit is the amount we spend annually over and above the amount we collect in taxes, so to put a complete stop to going into further debt we have to reduce the deficit spending to zero and then push it further so that we have a budget surplus that can be applied to the accumulated national debt. That means we need to reduce annual spending by the government by more than $1 trillion and maintain that reduction for decades.
If we are to survive this imaginary scenario, we have to imagine that a majority of voters in America understand that they have to give up something that they now benefit from in order to reduce the chance that they will lose a great deal more. We have to imagine that not only will these voters vote for a candidate who pledges to cut spending on a massive scale but that once elected, he and the majority of Congress will actually do that cutting. Think about it and then hope that this remains an imaginary scenario.
Tom Watkins lives in Montpelier. He can be reached at TomW@21VT.us.MORE IN Commentary
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