US Must Address Debt, Warns Debt Commission

President Obama’s bi-partisan debt commission gave a preliminary read out of the nation’s fiscal situation today.  There was nothing earth shattering about the conclusion.  The prognosis from co-chair Erskine Bowles is that current trends will destroy the country from within.  I think Bowles is actually a bit off on that one as the holders of the debt and the bond vigilantes will take care of the destruction; it’s just that our congress has given them an assist. 

I once read that people should always insist that they be taxed for everything the government proposes to do.  That sounds harsh, but it’s really the only way you can truly feel the cost of entitlements, wars, wild defense appropriations and etc.  Of course, along with being taxed, I’d argue that citizens would have to insist on sound monetary policies as well.  In other words, no more printing of dollars to create inflation to pay off old debts.  The true cost of everything that was promised to us or committed to the military industrial complex was masked by debt creation, money creation or both.   

The only reason why this is coming to an end is the diminished ability to continue to do both.  In the face of impending discipline to be imposed the markets, we now have a commission that’s been formed to recommend hard choices; the sort of choices that our politicians have been wont to make and that we’ve been wont to accept.

To be sure, as I’ve said here many times before, times are about to become far different than what we’re accustomed to and there’ll be new challenges for all of us.  That’s not all bad however, because at some point this also means that the old left-right political paradigm will pass.  Supply side economics will be seen as hubris along with unbridled Keynesianism.  In the place of  both will come philosophies revolving around fiscal and monetary soundness.  From that necessarily arises new foreign and domestic policies that align with the new philosophy.  We have no choice in this matter as we won’t be able to afford anything else.

Debt commission leaders paint gloomy picture

By GLEN JOHNSON, Associated Press Writer Glen Johnson, Associated Press Writer Sun Jul 11, 9:30 pm ET

BOSTON – The heads of President Barack Obama’s national debt commission painted a gloomy picture Sunday as the United States struggles to get its spending under control.

Republican Alan Simpson and Democrat Erskine Bowles told a meeting of the National Governors Association that everything needs to be considered — including curtailing popular tax breaks, such as the home mortgage deduction, and instituting a financial trigger mechanism for gaining Medicare coverage.

The nation’s total federal debt next year is expected to exceed $14 trillion — about $47,000 for every U.S. resident.

“This debt is like a cancer,” Bowles said in a sober presentation nonetheless lightened by humorous asides between him and Simpson. “It is truly going to destroy the country from within.”

Simpson said the entirety of the nation’s current discretionary spending is consumed by the Medicare, Medicaid and Social Security programs.

“The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans, the whole rest of the discretionary budget, is being financed by China and other countries,” said Simpson. China alone currently holds $920 billion in U.S. IOUs.

Bowles said if the U.S. makes no changes it will be spending $2 trillion by 2020 just for interest on the national debt.

“Just think about that: All that money, going somewhere else, to create jobs and opportunity somewhere else,” he said.

Simpson, the former Republican senator from Wyoming, and Bowles, the former White House chief of staff under Democratic President Bill Clinton, head an 18-member commission. It’s charged with coming up with a plan by Dec. 1 to reduce the government’s annual deficits to 3 percent of the national economy by 2015.

Bowles led successful 1997 talks with Republicans on a balanced budget bill that produced government surpluses the last three years Clinton was in office and the first year of Republican George W. Bush’s presidency. Simpson, as the Senate’s GOP whip in 1990, helped round up votes for a budget bill in which President George H.W. Bush broke his “read my lips” pledge not to raise taxes.

Despite their backgrounds, both Simpson and Bowles said they were not 100 percent confident of success this time around.

Simpson labeled the commission members “good people of deep, deep difference, knowing the possibility of the odds of success are rather harrowing to say the least.”

Bowles also said Congress had to be ready to accept the commission’s findings.

“What we do is not so hard to figure out; it’s the political consequences of doing it that makes it really tough,” he said.

Arkansas Gov. Mike Beebe was one of those leaders who sat in rapt attention during the presentation, one of the first in public by the commission leaders.

“I don’t know that I ever heard a gloomier picture painted that created more hope for me,” said Beebe, commending its frankness.

http://news.yahoo.com/s/ap/20100712/ap_on_bi_ge/us_governors_debt_commission_5

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9 Responses to “US Must Address Debt, Warns Debt Commission”
  1. As you say: No surprise here. We didn’t need a commission to tell us what we already know.

    I once read that people should always insist that they be taxed for everything the government proposes to do. That sounds harsh, but it’s really the only way you can truly feel the cost of entitlements, wars, wild defense appropriations and etc.

    The government doesn’t want us to feel the cost. That’s why it has resorted to all kind of trickery to mask the pain we’d feel were we directly impacted.

    We did away with the draft, and went to an all-volunteer military to blunt the pain of families from coast to coast, the rich and the poor, when our young draftees died. This is one reason why the Vietnam War ended when it did. Too many of our nation’s youth were dying, in a war that didn’t make sense, and people took their grief to the streets.

    Similarly, we don’t raise taxes to fight wars. We borrow from those abroad, and pay them hugely from our treasure to cover the interest on the loans.

    Were we taxed to pay for the wars in Iraq and Afghanistan, just how long do you think we would be at war? And despite the screams of hawks, we’d enter very few wars, and those we did enter, would be over in a jiffy.

    Those in the government realized, some time ago, if you don’t tax, if you don’t have a draft, you can do pretty much militarily that you wish to do.

    Yes, we need to feel the pain. Right now, that pain is being delayed, and that’s a bad thing: It makes us reluctant to do what’s in our best interest, and capitulate to what others say is in our best interest– those, for example, who benefit from wars.

    “[w]e now have a commission that’s been formed to recommend hard choices; the sort of choices that our politicians have been wont to make and that we’ve been wont to accept.”

    Politics, as it’s currently practiced, almost certainly doom any endeavor, no matter how salutary. An impartial, bi-partisan commission (hopefully), removes that hurdle, and allows combatants to set aside politics, one-upmanship, power grabs, and other political machinations, so that solutions may be sought that may have been elusive before a pronouncement from the commission.

    At least, the atmosphere for progress is available. Whether it will be used to advance change is still subject to the vagaries of political convenience and political in-fighting.

    My fear is this: Raising taxes at this time (doing away with home mortgage deductions, for example) could stall the recovery, and further depress the creation of jobs, and the taxes that a vigorous economy could generate.

    • Greg L says:

      We did away with the draft, and went to an all-volunteer military to blunt the pain of families from coast to coast, the rich and the poor, when our young draftees died. This is one reason why the Vietnam War ended when it did. Too many of our nation’s youth were dying, in a war that didn’t make sense, and people took their grief to the streets.
      This is an excellent point BD. I think Vietnam changed the entire outlook of the MIC and the political establishment on waging war. Future wars were designed to be aseptic and we see that in the lack of a draft and the lack of coverage (i.e. caskets and etc). Further evidence of this can be found in weapons development programs, particularly those where robots are used, such as the drones we’re using now. Still more can be found in the use of proxies to fight our wars (i.e. “let’s get the Iraqi’s to stand up so we can stand down”). The bottom line is that if a war is just, the people have no problem stepping up, but the powers that be knew that the nature of the wars we’d be fighting were of conquest and it’s hard for folks to accept dying for energy interests, bankers and etc. So since it’d be difficult to convince the people, they figured that they’d eliminate the cost of war–both financial and the personal sacrifice. You’re spot on, if we truly felt the cost of war, there’d be far fewer and of short duration. Of course, our feeling the consequences of war doesn’t fit the business model of those who profit from them.

      My fear is this: Raising taxes at this time (doing away with home mortgage deductions, for example) could stall the recovery, and further depress the creation of jobs, and the taxes that a vigorous economy could generate.

      Taxes are definitely going up my friend, but there are a few folks who believe that this commission will recommend a european style VAT tax which will give Obama some cover to engage in the discussion about implementing one. That’s about the only viable solution on the tax front as they wouldn’t be able to raise income taxes high enough to address the debt issue IMHO. I think a VAT or national sales taxes is far more efficient in collecting taxes as it doesn’t require cadres of lawyers, CPA’s and IRS agents to administer and it possibly might be fairer. The problem I have is leaving the income tax system in place at the same time along with whether or not this creates another funding source for the MIC and other wild spending. If this winds up being just another “mask”, then our underlying issues will remain.

  2. Brother Greg L:

    About 5 years ago I traveled to Dallas TX with my family. (My wife is Jamaican). We visited Jamaican friends there and thus they threw a big party for our visit in their city. The day of the party we traveled to a slaughter house so that we could get some fresh goat meat and chicken for the fabulous meal that the ladies were about to hook up for the evening. I had never been to a slaughter house before and it was eye opening to see the process by which we receive our food that is from animal products.

    What is the point of this tale as it relates to the story? We were allowed to walk back to the stockyard to hand pick the goat that we wanted to eat for the night. I recall walking through a maze of iron fencing. The very same walk way that the farm animals are lead to their final meeting with those with sharp instruments and electric shock wands (for the pigs and cows) to turn them into food.

    As we got to the pen where they kept the goats I noted that there were about 10 goats in the pen.

    There was ONE MALE GOAT among them.

    We came to his area to choose which of them we were going to eat for the evening.

    As for “Billie Goat ‘D’ Williams” all he was concerned with was humping every single female goat in the pen, oblivious about the fate that awaited him and the rest of his lot.

    When I think about the persistent battles that go on in this nation:

    * Between ideologies
    * Between parties
    * Between races
    * Between income classes

    I see a bunch of goats who don’t realize where the maze that they willfully walk through is leading to.

    Those who chose “being in receipt of” over “competency development within their midst” are going to be the first goats to slaughter when the inevitable occurs.

    • “Those who chose “being in receipt of” over “competency development within their midst” are going to be the first goats to slaughter when the inevitable occurs.” C.F.

      Those “in receipt of,” as you describe them, aren’t the ones engaged in the “persistent battles that go on in this nation.” As you describe them:

      * Between ideologies
      * Between parties
      * Between races
      * Between income classes

      Ideologies set agendas, and develop policies to which we all must adhere;
      Political parties expound, and exploit ideologies;
      Races are manipulated by Political parties through the use of ideologies;
      And income classes are generally established by the colorline.

      There’s a bigger picture here that transcends them all. But that picture is lost to many in the world, but it’s picking up steam.

      Your view of the world is pure Ayn Rand, and is a very simplistic one. She, too, divided the world into two groups–essentially, those who provide, and those who’re benefited by those who provide. Givers and takers. Producers and consumers. Intellectuals and dunces. Leaders and followers. Committees and individuals. Communism and capitalism.

      All of this fail to take into account the larger picture of which I speak. The world is one large ecosystem. When we fail to acknowledge that at the physical, social, and political levels, critical elements of the whole are compromised. Rather than making the whole stronger, it is weakened.

      That “inevitability” of which you speak is more devastating than you know. We stand at the threshold of the destruction of life here on this planet as we know it. Why? It’s because we pretend that the “ecosystem” doesn’t exist, that there’s neither a “social ecosystem,” a” political ecosystem,” or a “physical one.”

      Don’t take my word for it. Open your eyes! Look around! Divisions are killing us. An ecosystem seeks to harmonize all within it, to function as one, as a “unit.”

      Yet, I’m sure you can’t hear me. I’m coming from left field. My words don’t resonate with your worldview. One of us is right, and the other is wrong. That division, alone, will lead to our certain demise, and be our undoing.

      • Black Disapora:

        The key difference between you and I is that, as I see you, YOU seek to achieve your level of satisfaction by fighting against certain principalities (capitalism and global imperialism).

        I am of the belief that a group of people that are desiring to obtain their permanent interests would do so by defining a plot of land that they control and CONTROLLING THE VARIABLES there in as much as possible.

        I suggest that you watch the CNBC documentary “A House Of Cards” which was the best and most expansive tale of what really happened to trigger the 2008 market collapse. The key reason why I brought this up is because several of the people that appeared on the show made the case that DESPITE the “I told you so” justifications of the prognosticators – the whole of the individuals engaged in the market acceleration were interested in pulling the plug and thus risk their position within.

        Black Diaspora when I listen to those who drive the “Green Economy” similarly seek to retain their moral high ground and save the planet Earth it becomes quite clear that they have no interests in fatally crashing their own standard of living so that they might be in line with their theories.

        The sad truth is that the mass of humanity is REACTIONARY. The presence of a crisis provides more motivation to change than does the prediction of and the preemptive management for avoidance.

        Isn’t this proof of the EARTH REFRESHING HERSELF and RETAINING BALANCE OUT OF IMBALANCE?

  3. Black Disapora:

    “The key difference between you and I is that, as I see you, YOU seek to achieve your level of satisfaction by fighting against certain principalities (capitalism and global imperialism).”

    No, not true. People can do whatever they choose. None of the things you mentioned can do me any harm. I find “satisfaction” by not “fighting,” but by affirming “what is.”

    Do you know “What is”?

    “the whole of the individuals engaged in the market acceleration were interested in pulling the plug and thus risk their position within.”

    I have nothing to risk. There’s more than enough, and pleny to share.

    “Black Diaspora when I listen to those who drive the “Green Economy” similarly seek to retain their moral high ground and save the planet Earth it becomes quite clear that they have no interests in fatally crashing their own standard of living so that they might be in line with their theories.”

    One’s standard of living is an individual thing: My standard may not be your standard, and your standard may not be mine. What I do know is this: We can have more than we have, by sharing what we have. It seems counterintuitive, but that’s the genius of it.

    “The sad truth is that the mass of humanity is REACTIONARY. The presence of a crisis provides more motivation to change than does the prediction of and the preemptive management for avoidance.”

    Neither will work. Remember the analogy of the frog in water being heated. By the time he realizes what’s happening, it’s too late. So it will be with us.

    Already, it may be too late.

    • Greg L says:

      As I read what both of you so articulately express. I can see it both ways and I believe that the two views are actually closer than they may appear to be at first glance. One of the major challenges that black folks face is actual control of our backyard. To my way of thinking, that means using the politics and economics of our communities to better our conditions. That’s not to suggest that exogenous factors don’t have impacts, but those impacts can be frequently mitigated by whether or not we’re in control of our own economic and political turf. Yes, that requires a level of competency and management ability. It also involves looking at things strategically and having the patience to see a plan through that may not yield immediate results. Yes, at this juncture, I believe more can be achieved if we focus on internal issues and exert control over them. This is the fundamental path that must be taken to obtain power and if we’re to change or impact the most vexing issues that we face as African-American people, every initiative must really be toward that end. Power and the ability to project it such that others accept your reality as their own is what we need. Actually, this is what is often exercised against us.

      Having said that however, I’m really not referring to power in the megalomaniacal sense of the word, or the wholesale abuse of power, people or situations and this is where I line up in the concern of our ecosystem. For the example, the street pirate can say he has power because he has temporarily acquired a wad of cash via some illicit enterprise. That’s not good for the ecosystem. The banker can assert that he’s done much good by putting people in houses who really lacked the ability to pay, but is it really good for the ecosystem? The politician can claim that he’s done a lot for the country by characterizing the opposition as socialists, but what does that do for political debate and the ability of those observing to learn something worthwhile that they might be able to contribute?

      What I’m suggesting that’s absent is balance. What I’m also suggesting is that there are rarely only mutually exclusive choices available to choose from. In other words, why can’t I be about taking care of business, yet still be concerned about doing something even through business for the greater good? Does it always have to be just about me? And just how much is enough? After you’ve made enough to cover you through a lifetime, why should you constantly be on the prowl for even more, even if you can’t possibly use it all in your lifetime?

      Assuming we get about the development of our economic and political backyard, do we really want to engage in the same practices that have threatened the ecosystem of the larger society? I suppose that’s really the question. The issue is one of balance, because we simply can’t be victims forever either.

  4. ” In other words, why can’t I be about taking care of business, yet still be concerned about doing something even through business for the greater good? Does it always have to be just about me? And just how much is enough? After you’ve made enough to cover you through a lifetime, why should you constantly be on the prowl for even more, even if you can’t possibly use it all in your lifetime?” Greg L.

    Sharing is caring, as you’ve articulated. But that’s not the American way (as usually practiced by business), nor is it the way of many nations throughout the world, despite the existence of some that have security nets.

    Greed is good. It’s what makes the machinery run, and the global economy hum. Giving, except by way of foundations that target specific needs, is seen as “socialism,” especially when government is the perceived benefactor.

    Most of our social conditioning underscores this greed. Why should we give our hard-earned money to the non-productive elements in society? What in the hell are they contributing?

    From my perspective they contribute hugely, but I’m aware that my perspective is outside of the mainstream. Think of the ecosystem, again. Some things within it appear to be redundant or useless. But don’t be fooled! All of life contribute to the whole.

    What one does effects the whole. This is the lesson we should have learned millennia ago, and would have, but for the belief that there’s not enough.

    There’s plenty, and enough to spare.

    Our salvation as a species, as well as the whole ecosystem, will depend on how well, and how quickly, we acknowledge these indisputable facts.

  5. “What I’m suggesting that’s absent is balance. ” Greg L.

    Balance looks to the whole by taking into account all the elements in the whole, concluding that all in the whole is indispensable to the long-term existence of the whole.

    You’re right. We lack balance. We think some of the elements in the whole can be ignored, or destroyed. This is dangerous thinking. It may offer up short-term gains for certain elements in the whole, but doom the whole to eventual destruction.

    This is the crossroad at which we have now arrived. What we do in the next several decades will either prolong our collective existence, or curtail it.

    We’re at war with our various ecosystems–social, economic, political, and environmental. As long as we see them as something to bring into submission, to dominate, to suppress, to conquer, or subdue, we hasten our death, and the death of the various systems. (Cooperation is needed, where the needs of all are addressed, especially the interrelated aspects of the various elements in the Whole.) Pitting one element within the systems against other elements in the system in a mad rush to get power, money, privilege, or what have you, weakens the whole, to a degree greater than it can survive without an immediate correction, if at all.

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