Charles Gray | Short-term gain, long-term pain
The Gray Area | Last week’s Obama event showcased the worst of this administration
November 8, 2011, 12:35 am · Updated November 10, 2011, 1:44 am·
The Gray Area
Recently, a person whom I consider a mentor and good friend had a son.
I got a chance to see the child for the first time last Monday. This experience got me thinking about what this country will be like 21 years from now when that child is my age.
So I looked up some numbers to put in perspective how his life will be affected by the fiscal decisions of our current government.
David Walker, a former comptroller general who served under presidents Bill Clinton and George W. Bush, laid out the current situation well. “Our $56 trillion in unfunded obligations amount to $483,000 per household. That’s 10 times the median household income — so it’s as if everyone had a second or third mortgage on a house equal to 10 times their income but no house they can lay claim to,” he said in a 2009 Wall Street Journal article.
In history, the lesson from debt is very clear. Countries can accumulate large levels of debt, but they must eventually be paid for either through higher taxes (possibly through the hidden tax of inflation), lower services or a combination of both.
In 2033, when that child graduates from college, taxes will have to be around 45 percent of income on average to pay for these obligations, according to Walker’s book Comeback America. That is a dramatic increase from the 21 percent on income that Americans pay on average to the federal government. Add on state and local debts that are separate from the federal government, and we have an absolutely unsustainable tax burden.
What is devastating about this scenario is how much lower the standard of living will be. Americans will pay on average 23 more cents of every dollar earned to the federal government. That is money they can’t be using to buy a home or purchase goods for their families.
Right now, Greece provides a blueprint for how this scenario could look. The government’s high debt-to-GDP ratio, 152 percent, has made it difficult for the country to receive short-term funding. As a result, it has become a banana republic of sorts, requiring funding from other nations while also having to raise taxes. At this level of taxation, there is very little incentive to work, and little innovation occurs.
I had those numbers in mind when I watched Wednesday’s launch of Young Americans for Obama on campus on C-SPAN.
What troubled me about the event was how much it focused on the short-term gain of those in the audience without thinking of the long-term pain that will be caused to them but also to that young boy I saw last Monday.
The event was divided into three segments: jobs, health care and education.
The first segment centered on how the government can “subsidize” job creation right now; the second was about how the government can “subsidize” health care in perpetuity; and the third was about how the government can “subsidize” higher education.
There was a video that outlined these supposed achievements, and the crowd cheered with mention of each new government program.
The three segments had one thing in common: they all talked about what the government is giving you, but nothing was said about who was going to pay for it. No one would admit that there’s no free lunch; costs borne by the present must be paid by the future.
When markets decide to stop buying our short-term debt at low cost, as happened to Greece, the fiscal adjustments our government will have to make will be devastating to our country’s standard of living.
Margaret Thatcher said it best: “The problem with socialism is that eventually you run out of other people’s money.”
In order to get the debt conversation moving, leadership must come from the top. One thing’s for sure: based on the Young Americans for Obama campaign launch, that leadership isn’t coming from our current White House.
The first step in the right direction is to agree that the numbers simply do not add up. That is impossible with the short-term, “me-first” tone of Wednesday’s event.
I was most disturbed when Mayor Michael Nutter concluded the program by saying, when you think about voting for Barack Obama, “you’re really voting for yourselves.”
I can’t think of a more selfish message. For one election, can we make a pact to not let our elected leaders get away with this stuff? And instead think about that child who, 21 years from now, will have to pay for the debts we accumulate by our decisions today?
Charles Gray, president of the College Republicans, is a College and Wharton senior from Casper, Wyo. His email address is email@example.com. The Gray Area appears every Tuesday.