Perry: U.S. tipping but hasn’t toppled yet
For the Nevada Appeal
Assuming that a deal is reached last minute on the debt ceiling, the U.S. economy still will have a great deal of headwind before we see any meaningful recovery.
We still have the American consumer retrenching. They have been hammered from every angle. Unemployed or underemployed, they have been digging their way out of consumer debt, losing value in their homes, having less spending power thanks to the declining dollar, and they are just plain scared.
Also at work is deleveraging in the financial sector, swings in commodity prices and increasing government regulation. Combining all these factors along with others will most likely result in very weak growth in Gross Domestic Product for years to come. Our current GDP growth this year is an enemic 1.8 to 2 percent, well below the 3.3 percent needed to keep employment rates steady. If growth remains below 2 percent, unemployment will be over 23 percent domestically by 2018. That means more people in need of government assistance.
From 1950 to 1980, citizens relying on some sort of government program for assistance rose from 29 percent to more than 60 percent – and if nothing changes, it will be more than 68 percent by 2018. I don’t mean to be the party-pooper here, but if two-thirds of us need money from the government to survive, what does that imply about the national debt?
Private-sector job growth will most likely continue to be restrained by outsourcing, while incentives to improve U.S. productivity are hampered by high corporate tax rates and overregulation. Without good jobs, will the average citizen be able to free themselves from the addiction of government handouts in time to save the good old USA, or will they fall into the already familiar pattern of riots and civil disobedience currently seen in the EuroZone? Will it be a foregone conclusion that our AAA credit rating on Treasury debt goes to AA, then A, then a real possibility of actual default? Our current trajectory is heading in a direction that could truly be disastrous. Reading reports from the Government Accountability Office or the Congressional Budget Office are more frightening to me than a Stephen King novel.
Those of you who think we can tax our way out of the current fiscal mess are sorely mistaken. The largest black hole sucking money out of the annual budget is entitlements. And with the largest glut of population, the baby-boomers, just beginning to qualify for Social Security and Medicare, the size of that black hole will grow.
I have seen ads on TV that indicate that all we need to do is cut back on wasteful spending and foreign aid, and all will be solved. These ads are so misleading, especially to seniors already feeling insecure about the future of entitlements. As the 2012 election gets closer, these crazy ads about dropping Grandma off a cliff are only going to get worse. As a former financial planner, nothing makes me angrier than those who try to scare older folks in order to get their vote.
This country is at a critical point in time – a tipping point, you might say – in that we can make good, but painful long-term decisions about the future of our nation, or we can think of ourselves only and how unfair it is that there is no more money in the government trough. Is it unfair that you were taxed all those years of working only to be told that the benefits promised will now need to be modified? Hell yes, it is unfair, but it is reality and we must deal with it.
The facts are what they are and, while Democrats and Republicans can argue some of the details, the solutions are clear: Cut spending massively, make the tax system simple and fair to all, and reward ingenuity, honesty and integrity without overregulation. In spite of everything, I still believe we have great people, who if left alone can do great things. What we don’t have is functional and fair government. If we want our country back, things will have to change. It won’t be fun or fast, but the infrastructure of our way of life is crumbling, and we as individuals must rebuild it. I am not counting us out just yet.
• Carol Perry has been a Northern Nevada resident since 1983. You can reach her at firstname.lastname@example.org.