NOTE: This post includes some material published in earlier blog posts. It is posted here as the electronic version of today’s AJC print column:
As marriage counselors will attest, more marriages are broken up by fights over money than for any other reason. That’s particularly true during tough economic times, when dreams falter and tough choices have to be made. That reality also helps to explain the current state of American politics, which is bitter and highly emotional. The 2012 campaign season is at root a battle over money, with two partners each angrily insistent that the other one has lost all contact with the real world.
In trying to sort it all out, however, it’s important to acknowledge that we are actually struggling with two related yet very distinct challenges, and it’s important to think each of them through on their own terms.
Let’s start with this one: How do we finance our government? It is undeniably true that the U.S. government is living beyond its means and has been doing so for a long time. It is equally true that such a practice is unsustainable. For decades we have been spending more and more money while slashing the taxes needed to support that spending. And while a great deal of the responsibility for that failure falls on our political leaders, the ultimate buck stops with we the people. We like lower taxes, we like more government programs, and so we elect people who give us those nice things, future consequences be damned. Then, of course, we get mad at them because they gave us what we demanded.
There is only one way out of this. We have to cut projected spending and raise taxes. Period. You can quibble about what the ratio of spending cuts to tax increases ought to be. You can quibble about which programs ought to be cut deepest, and about whose taxes ought to go up more quickly. But politically and mathematically, there is no way out without a compromise that includes spending cuts and tax hikes.
Personally, I would start with an end to the Bush-era tax cuts, across the board, for taxpayers in every bracket. It would have to be done gradually, to avoid an economic backlash, but the goal should be reverting to the Clinton-era tax rates that by 2000 had brought the budget close to balance.
That would have to be accompanied by plans to rein in spending, including changes in entitlements, such as reducing annual cost of living adjustments to Social Security. Medicare spending would also have to be brought under control, and we have to come to the psychologically difficult realization that we can no longer afford a military capable of dominating in every little corner of a very big and unruly world. Meeting such a challenge will be difficult, but it is at least possible to envision a way to do so.
Unfortunately, the second major economic challenge facing the United States is much more complex, with no clear path to resolution. In brief, the U.S. economy has lost its vigor and its job-producing ability, and it has been trapped in those doldrums for a long time. It is not simply a product of this recession. Let’s look at some numbers:
When George W. Bush ended his first term as president in January 2005, the U.S. economy boasted 913,000 fewer private-sector jobs than it did when he took office. The major tax cuts that Bush championed in 2001 and 2003 simply did not produce the growth promised on its behalf. By the time Bush left the White House in January 2009, we had added 20 million people but the economy boasted 646,000 fewer private-sector jobs than it had eight years earlier.
Since then, we’ve turned things around at least a little. In August, the most recent numbers available, we had 414,000 more private-sector jobs than when Barack Obama was sworn in. That’s not terrible considering that we had to overcome the loss of 2.1 million jobs in the first three months of his presidency alone.
“Not terrible,” however, is not good enough, not by a long shot. The U.S. economy is in the middle of a profound transition, with wealth concentrating at the top, fewer new jobs being generated and fewer of those jobs paying decent wages. For the most part, those changes are not the fault of a presidential administration or a party or even of politicians in general, but a consequence of deeper, more stubborn economic trends that are global in scale and unstoppable as a glacier.
The second problem — the underlying changes in our economy — makes addressing the issue of government finance more complex. And as we’ve found, the interaction between those two challenges is almost impossible to discuss intelligently in the midst of a campaign season.
– Jay Bookman