Today, we learned that President Obama and the Republicans’ Senate leadership have reached a compromise concerning the issues of tax cuts and unemployment benefits. Rather than either side ceding significant ground, both parties agreed that all concerned should get what they seek. As it stands, the political settlement allows for a two-year extension of the Bush era tax cuts, while simultaneously extending unemployment benefits an additional 13 months (beyond the current maximum of 99 weeks of benefits.) For good measure, the parties have also proposed a one-year reduction of the payroll tax (used to fund Social Security) by two percentage points. The deal’s completion is not necessarily assured, as it must still face members of the House of Representatives—some of whom stridently disagree with one or the other of the plan’s major proposals.
Unaddressed in this short-sighted and ill-conceived political posturing are the ballooning national deficit and debt that will hang around the necks of future American generations. Richard Haass and Roger Altman have written persuasively about the national power implications of such ignorance. In addition to the budgetary effects of interest payments on an increasing national debt (which will require both increased taxes and reductions in non-debt spending,) the United States also faces losing one of its most effective “soft power” tools, i.e. the use of the U.S. dollar as the currency of choice in international business. Already we are seeing international actors begin to question the sagacity of holding and conducting trade with the American greenback. Should these actions have a cascading effect among other actors, one wonders who will buy the debt instruments (Treasury bills and the like) necessary for the United States and its citizens to live beyond their means.
What is particularly damning about this bilateral Washington compromise is its refusal to address the fundamental cultural and economic problems undergirding the United States’ weak economic position. While additional short-term government spending may be necessary to prevent an economy’s freefall (an assertion that I am not in complete agreement with, but that seems to be the position of many economists,) it must be targeted spending that builds or buttresses the foundations of sustained growth. For example, targeted programs that (a) improve the country’s crumbling infrastructure, (b) assist training and re-training programs for U.S. workers, and/or (c) fund research and development to increase American productivity would be useful types of such government spending. Across-the-board money in pockets to boost consumption (much of which will inevitably be consumption of imports) hardly seems to pass the common-sense test for improving the long-term economy.
Additionally, such short-term spending must be paired with a plan to address debt reduction. To date, the latter (and, arguably, more fundamental) requirement remains ignored. Although most long-term analyses have unchanged entitlement/non-discretionary spending (Medicare, Social Security, and the expanding health provisions passed during the Bush II and Obama administrations) and debt servicing crowding-out discretionary spending, our leading politicians fail to coherently address this fundamental weakness. We will soon face (and, some argue, already face) a Ponzi scheme of entitlements that will increasingly tax our children and grandchildren to provide for a growing percentage of graying Americans. Something must give.
What must be done? Our nation’s long-term health requires immediate initiatives, some of which can be tied to the short-term stimulus spending our politicians desperately desire.
• First, the United States must have a coherent debate and resolution concerning its entitlement programs. Social Security’s reform can no longer remain the third-rail of Washington politics. Some combination of an increase in retirement age, decrease in benefits, and increase in payroll taxes must be developed and implemented if the program is to remain solvent. Americans’ attachment to the arbitrary retirement age of 65—an age selected in 1935 when a far smaller percentage of U.S. adults lived to see that age—is puzzling, as is the idea that all citizens should receive the same Social Security benefits, regardless of their other sources of retirement income.
• Second, our nation’s long-term productivity is fundamentally tied to the size, quality, and innovative abilities of our labor pool, which will consist of (a) our children and grandchildren as they enter their wage-earning years, and (b) the quality and quantity of immigrants that the United States can attract. Therefore, education reform and immigration reform are priorities of the first order.
o One possible method of education reform that has not received nearly enough implementation is a voucher system. Such a system would allow students and parents to use market mechanisms to shop for better education opportunities. Given American students’ decreasing academic performances (when compared to students of other countries) over the last two decades, it is hard to imagine that we could do worse with an individual voucher program.
o Immigration reform remains an important component of bolstering the United States’ labor resources. Increasing percentages of university students studying math, engineering, and the sciences are either foreign nationals or recent immigrants, as are a significant percentage of start-up technology companies’ founders. Our country requires an immigration reform plan that significantly expands the legal opportunities for immigration, not only to take advantage of those at the high-end of the education spectrum, but also to take advantage of the capabilities of hard-working, law-abiding immigrants who seek the better life the American dream promises. Immigration must be tied to socialization that fosters the nationalism and responsibility expected of American citizens.
• Third, if agreement is reached that short-term economic stimulus is necessary, we must use such resources appropriately. Improve and expand the roads, highways, and railroads that facilitate our domestic trade. Improve the ports that facilitate our international trade. Improve the electrical, telecommunication, and energy grids. Devote more resources to research and development that might have multiple benefits for numerous fields (particularly energy security.) Consider that, in some cases, a modern version of the Civilian Conservation Corps may be more beneficial than simply providing monthly unemployment benefits with little quantifiable gain.
Most states of these United States have laws prohibiting the reckless endangerment of citizens, particularly of children. With some variations, reckless endangerment is generally defined as “…recklessly engage[ing] in conduct which creates a substantial risk of serious physical injury to another person.” I can think of no better example of reckless endangerment at the macro-level than the incoherent policies cobbled together by politicians of all stripes. If we refuse to condone reckless endangerment of one individual by another, why do we allow the United States Government to endanger the health and vitality of entire generations of young and future Americans?