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A Pox on All Three Houses of Government: Their Timidity Created the Fiscal Cliff and Now They Threaten to Push Us Over It

December 31st, 2012 · No Comments · Business Management, Politics and Politicians Gone Awry

The looming calamity is nothing more than a symptom of the type of government that results when governing is entrusted to those whose only objective is to be in government.

Now, only after our leaders (a term used euphemistically) in Washington have forced us to stare into the abyss of a manufactured financial upheaval they created, do they come together to push off the cataclysm yet again. As if that were not bad enough, we are expected to bow-down and offer hosanna to these politicos for their FCefforts. And the really sad thing is that we do just that; so that we can go on with our lives and not have to worry about the impact on society as a whole. This is exactly the cycle that the elected officials in Washington count on to keep themselves in power. When you come right down to it, for all the pleating of dysfunction and inaction in government we complain about, the truth is that if were we forced to acknowledge the cause, we would have to concede that it is us.

This exasperation with the apparent paralysis and ineffectiveness of government is triggered by confusion over the objective of government. The general assumption is that the purpose of government is to provide services and protections to individuals that allow society to function and to solve problems that emerge that could threaten the continuity of society. Unfortunately it doesn’t work that way.

The Real Objective of Government

What has become the real objective of those in government is the expansion of government and the preservation of their careers in government. This means the promise of services that are not paid for, the lure of individual rights that impinge on the rights of others and the avoidance of solutions to real problems, because the resolution of problems calls for compromise and sacrifice that those who want to remain in government cannot risk supporting. If the objective of government is viewed from this perspective, it is easy to see why the government appears to be dysfunctional, why more money is spent than collected and that the approach to solving real problems is not action, but procrastination.


We are confronted with this so-called “fiscal cliff” because in 2011 the elected leaders in Washington faced a simple problem: “increasing the federal debt limit,” and resolved it by creating a complicated, unworkable solution. The national debt is caused by past spending that was not paid for by increased revenues, yet has nothing to do with future spending. Unable to come to grips with the real problem – future spending not paid for with future revenues – the leaders agreed to extend the debt limit only on condition of an agreement to implement indiscriminate cuts (what is referred to as “sequester”) that would take effect if no resolution to the long-term problem was agreed upon by the start of 2013. Of course that did not happen and so today we are faced with the “fiscal cliff.”

If this whole situation seems complicated, confusing – even boring – to you, then the leaders in Washington have achieved their objective. We now look to them to solve this problem that they created. And the cycle will be continued as the leaders give the impression of resolving the crisis but, in reality, are only pushing the problem off to some netherworld of the future; when the shadowy process will be repeated again. And again. And again.

Simple is as Simple Does

The irony is that the resolution of these issues and challenges is as simple to solve as they seem complicated. It calls for the same approach that works well in business: Instead of taking simple issues and making them complicated, take complicated issues and make them simple.

It starts by recognizing one simple fact: It may be a harsh indictment, but the truth is that the very core of the problem is that the 537 elected leaders in Washington (435 Congressmen, 100 Senators and one President and Vice-President) are more interested in their future in government than they are in the future of the country. These 537 individuals place their personal interests above those of 330 million Americans. They are more concerned with winning future elections, than with winning the future of the country.

What is even more astounding is that they openly acknowledge this to be the case. Republican Senate Leader Mitch McConnell was famously quoted in 2010 as indicating that the number one priority of the Republicans was to “make sure Obama is a one-term president.” Even if the proposals of President Obama would be mitch-mcconnellgood for the country, they were to be resisted in the effort to see that he would not be re-elected. Today McConnell admits that many of his actions are based on the threat to his re-election in 2014, rather than threats to the welfare of the country. Many of the Republican congressmen who torpedoed Speaker Boehner’s tepid effort to move resolution of the fiscal cliff forward, admitted they did so because of concern for a “primary challenge” in the next election. In 2011, President Obama scuttled a “grand bargain” with Speaker Boehner, even though the agreement would have gone a long way to solving fiscal problems, because part of the agreement might “anger his base” and threaten his re-election.

This may seem like an intractable structural problem that resists resolution, but it’s not. The solutions may be out of the norm, but they are simple. Here is what we could do:

Make an offer to each congressman and senator that if they will take the actions necessary – they all know what needs to be done – to resolve the deficit spending and mushrooming national debt of the country, then we will take care of their future. The offer we could make to these individuals is that if they “do the right thing” and take the actions of cutting expenses and raising revenues to eliminate the deficit and begin to reduce the national debt – and then lose their next election – we will continue to pay their full salary and provide all the benefits and rights of office, for the rest of their lives.

Sure, this idea seems too simple – maybe stupid and expensive – but it just might work. After all, these politicos have demonstrated time and again that they are more concerned with their future and security than that of the country. So, if we guarantee their future and security, maybe they will do the same for the country. As far as the expense, it certainly would be cheaper to pay the salaries for life, than to live with the current situation for life.

How about this idea? Since the Republicans are paranoid about any increase in taxes and the Democrats are just as intransigent when it comes to reductions in spending for health care and entitlement benefits, what we could do is give the Republicans carte blanche to cut government spending by as much as they want over the next 10 years and to balance this, give the Democrats a free hand to raise taxes by 50 percent of the amount the Republicans cut expenses by. In the current environment – fearful of offending each “base” – the Republicans agree that increased tax revenues are needed, but will not specify what form they might take and the Democrats agree that entitlement spending needs to be reduced, but are unwilling quantify specific cuts. Allowing the Republicans to pick the cuts and the Democrats to pick the taxes would move the solution forward. Since the Republicans would be blamed for making benefit cuts and Democrats would be blamed for increased taxes, both would be insulated from the wrath of their voter base. This may be another idea that seems unworkable and stupid, but how can this be any worse than the current structure?

There is one other idea: It’s called the “re-start button.” The fact is that 80 percent of the long-term deficit and national debt problem comes from the cost of providing mandated (promised) benefits for the Social Security, Medicare and Medicaid programs. (Assuming we don’t get into too many more wars that are fought, but not paid for.) While it would be virtually impossible – and unfair – to welch on promises made to those already benefiting from these programs, it would be possible to change the promises made to future participants.

The problems with the expenses for Social Security and Medicare are not so much what is being paid to current participants, but with paying the same level of benefits to future beneficiaries; without raising revenues to do so. The existing programs could be frozen in place and new plans designed that would reduce costs. For example, the age for participation in Medicare could be increased from 65 to 67 and instead of a universal 80/20 co-payment arrangement; benefits could be on a means-tested basis; with wealthier and higher income individuals paying a higher co-payment for benefits. Among other things, the cost for Social Security could be reduced by simply removing the present cap on Social Security income taxes.

Another good use for the re-start button would be with the tax code. A simple concept when introduced in 1913, it has become more convoluted, unbalanced and unfair as the political system itself. The current tax code is broken beyond repair and any talk of “reform” is more wishful thinking. Nobody believes the current crop of political leaders have the integrity and courage to solve the tax problems with “reforms.” The tax code should be tossed and the business practice of zero-based planning should be implemented; that is starting from scratch to justify every tax and deduction.

The point here is not to solve all the problems relating to deficit spending and the national debt, but to suggest that anything – no matter how simplistic or out on the edge – has to be better than the current approach.

And the Moral of the Story …

The fiscal problems of deficit spending and burgeoning national debt facing America today are not intractable or insoluble; they are not an act of nature, but man-made. Running out of oil is a natural problem, but promising too much and paying too little is an act of man, not nature. These problems are the result of an abuse of a system that has come to be dominated by political leaders who place their own interests ahead of the interests of the country.

Resolving the problems, in reality, is as easy as it was to create them. The political leaders in Washington know what needs to be done to solve the problems, but what is missing is the will, the courage, the integrity to do so. If you want to continue to deal with the same problems, then just keep accepting the same approach to solving problems by the leaders you elect. Problems are solved when leaders are willing to do what has not been done. But when leaders have a vested interest in continuing to do what has been done, then nothing will get done.
 

 

 

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