Sunday, February 21, 2010

‘We have met the enemy, and he is us’ - by Judge Jim Gray

OK, fun is fun, and fair is fair. But our economy is in serious trouble, which, in turn, means our country’s future is at stake. And, as Ayn Rand was quoted as saying, “You can’t fake reality forever.” So this will be a realistic and even blunt assessment of where our economy is, the problems we are facing, and what we should and must do about them. I am sorry to ruin your Sunday breakfast, but realities must be faced.

Just like the government of Greece, our country’s government is virtually bankrupt, which is to say that the federal government spends more than it takes in, and has been doing that for years. As a “short-term remedy,” the government has been using its irresponsible fallback ability literally to “print more money,” but this has simply aggravated the problem by building up huge budget deficits.

In addition, the signs are increasing that China, which holds more of our debt than any other country, is beginning to seek repayment, because their vast holdings are daily decreasing in value. If and when that happens, it will present us with another major economic crisis! So in so many ways our fiscal irresponsibility is inescapably catching up to us fast, and must be faced — now!

Specifically what are we facing? Using figures that come from economist Robert J. Samuelson, the federal government is projected in the next 10 years to spend about $45.8 trillion. But during that same period the government will take in revenues of only about $37.3 trillion, and even that is based upon the fabulously optimistic assumption that we will soon experience a full economic recovery. Thus the deficit is projected for the upcoming decade — in the best-case scenario — to be about $8.5 trillion, which will be about one-fifth of our total spending.

Starkly put, we cannot borrow our way out of debt. So we must now put into practice what we have been preaching for decades to Third World countries, and that is to “tighten our belts,” and act with fiscal prudence.

What are both our president and Congress doing to respond to this genuine crisis? Almost to a person, they are expressly ducking the hard questions, and are instead continuing to pander to us. How can they live with themselves by doing this while facing such economic peril? Because that is what we tell them we want them to do!

In today’s world, voters nationwide are expressing flagrant contradictions — all at the same time. On the one hand, more than a majority of voters are saying that they favor the so-called stimulus plan and want government to fix our economic problems, while on the other hand they are also saying that the government is too big and costly and spending much too much money, and that taxes are too high.

So what Pogo, the Walt Kelly comic strip character, was quoted years ago as observing is once again true: “We have met the enemy, and he is us.” We are the ones who are vehemently saying that we want our entitlements, while at the same time saying that we do not want to pay for them. So our elected representatives have been listening to us, catering to those perceived wishes, and faking reality for years — and they still continue to do so. So it is we who must change!

The truth is that fiscal balance can only be achieved, and our economic future secured, either by increasing government revenues by further increasing taxes, or by reducing government spending, or by a combination of both. In that regard, simple mathematics tells us that we could probably balance our budget by increasing all federal taxes by about 50%.

But that would probably not actually happen because that approach would, of course, be actively resisted by the people who would be called upon to pay those taxes. With time, those people would simply move their companies and assets out of the government’s reach, which would inflict further enormous harm upon our economy. In fact, we have experienced that phenomenon already, and would be well advised to lower the taxes we have today to entice those companies and assets back.

That leaves us to look at an appreciable reduction in governmental spending as the only remaining path to fiscal responsibility. So what should we look at? Well, as has been written several times in this column, we can start by passing sunset laws for our federal agencies that will inevitably reduce the size and cost of government. We can also repeal things like subsidies for farmers to grow and not grow various crops. Those things would be a start, but in themselves they would not be nearly enough at this point to bring us to fiscal stability.

No, what we are facing is much more serious. About $20 trillion of the projected $45.8 trillion in government spending will go for three programs: Medicare, which is health insurance for those who are 65 or older; Medicaid, which is health insurance for the poor; and Social Security. At present the average federal subsidy for each person who is 65 or older is $11,000 for Medicare, and $14,000 for Social Security, for a total of $25,000 per year. Obviously that is a lot of money, and, even speaking as a person who just qualified for Medicare last week, we can no longer afford it.

So we are going to be forced to change the Social Security system to take into account the wealth of the recipient, and reduce the benefits paid to those people. That is really a hard thing to say, because this was supposed to be our money that was being held for us in trust for our retirement. But in truth, the Social Security system was never set up that way. Instead Social Security was always a “pay as you go” program that paid money to today’s retirees that was taken from today’s workers. That means that there were no savings of money in trust for anybody. In other words, Social Security was a legalized Ponzi Scheme, and now reality is exposing that fraud.

Fiscal responsibility also virtually demands that our Social Security age must be pushed back from 65 to 70. Most mortality tables say that people who are now 65 can, on the average, look forward to another 18 years of life. That is much longer than when the Medicare and Social Security programs were originally put into effect, and the program never took that eventuality into account. This will certainly not be popular with people at that age, but the solvency of our country and our way of life simply require that result!

The counties in our state are in much the same position, but their problems to a large degree are caused by the vested benefits they owe to their public employees. These consist mostly of health and retirement entitlements. Think about it, the various county supervisors are almost always elected and re-elected with the financial help of government employees’ unions. Why are the unions so involved in these elections? Because the unions’ members are highly affected by how those supervisors vote.

So after the elections are over, there exists a definite conflict of interest when the supervisors are called upon to decide upon the various financial benefits for the public employees. If they do not vote for benefits that are lucrative enough, they will arouse the anger of their biggest contributors, and this will probably result in their losing their next election. So often the supervisors go to great lengths with county funds to please the unions. But with this scenario, no one looks out for the solvency of the counties. As a result, probably every city and county in California is financially insolvent, because they have more projected obligations than revenues.

Those are the realities. Discussions like this are certainly not fun, but eventually reality must be faced. In fact, our children demand it. Mostly, you and I will be fine, but our financial security and comfort are being paid for by mortgaging the future of our children and grandchildren. And I hope you agree with me that this is too high a cost to pay!

In a democracy our “leaders” are governed by only one universal principle: They will follow where the votes are. That means in this case that they will tell us the truth at their peril. Furthermore, as long as financial ruin does not happen while they are still in office, reality can be postponed until someone else’s term. So in effect, all of them have simply been doing our bidding since they were voted into office, and they will continue to do so. Therefore, it is not the “rascals” we elect to office that are to blame. The rascals are us.

JAMES P. GRAY is a retired judge of the Orange County Superior Court, the author of “Wearing the Robe – the Art and Responsibilities of Judging in Today’s Courts” (Square One Press, 2008), and can be contacted at or via his website at .

No comments: