I don’t know about you, but I’m already counting the days to two dates: Opening Day for Major League Baseball; and New Year’s Eve. I want to escape into my box scores, and then escape this year all together. The first quarter is not even completed, and yet this year already has presented us with more consequential events and decisions than we normally face over a decade.
Unfortunately, history doesn’t allow any of us to escape the time in which we live, so we need to face these events and decisions, and establish priorities. As I am watching events unfold, though, I see few people willing to take the reigns and focus seriously on setting these priorities. Even many of our Republican leaders seem to be flailing at the symptoms of our illness, rather than focusing on a proper treatment plan.
My guess is that anyone of you could come up with your own list of problems, but I believe that the three great issues of 2011 so far are our national debt; unrest throughout the Middle East; and the devastation of Japan. If we don’t make the right choices in addressing these issues this year, the consequences could create problems for the U.S. for at least a generation. So, I will deal with these in the order of importance that I see:
Our National Debt
When I say “National Debt”, I don’t just mean the debt owed by our federal government—I mean all public and private debt. Let’s take a look at of some numbers that I have gathered from multiple sources, including numbers recently compiled for Dick Morris, and by Americans For Prosperity:
- It is estimated that the total value of assets in the U.S. exceeds the total value of liabilities by about $25 trillion;
- U.S. national Gross Domestic Product—GDP—is between $14 and $15 trillion;
- Total federal-government debt is now over $14 trillion, grows at a rate of over $5 billion per day, and, over the last two years, has grown at a rate 27 times faster than over our entire history from 1789 to 2009;
- Annual federal-government expenditures exceed revenue by about $1.3 trillion;
- The State of Texas is dealing with a shortfall for the current fiscal year of $3 to $5 billion;
- The Texas Legislature also is grappling with a projected difference between what would be needed to continue state government’s current activities and projected revenue over the next two years of around $20 billion, which does not include future liabilities for outstanding bonds or unfunded pensions; and
- The total bond debt owed by just Harris County exceeds $3.4 billion, and the total bond debt owed by my local school district—Clear Creek ISD—is $1.077 billion, for an aggregate debt per Harris County resident within CCISD from just these two governmental agencies of $30,452.43 (which is more if you also live inside a municipality that is in debt).
On top of these numbers, the total private debt owed by U.S. citizens is estimated to range between $50 and $57 trillion—3 to 4 times GDP, and more than double the net worth of the country as a whole. Moreover, the price of most commodities have skyrocketed, as have unemployment and the money supply over the last two years, while average personal income has stayed flat or declined in real terms. As for the examples of local figures, these numbers don’t include the billions owed in short-term operating debt, long-term bond debt, and unfunded pension liabilities by local governments, special purpose entities (sports and convention authorities, port authorities, and transit authorities), and school districts.
Regardless of what the Paul Krugman’s of the world may say, this path is unsustainable. Unlike the 1930s, when our nation was the world’s largest creditor and held the greatest reserve of gold and other public and private assets, and could afford to incur more public debt to finance a public recovery, or unlike the 1950s when our economic wealth and industrial capacity could finance the Interstate Highway system and NASA, the U.S. in 2011 simply doesn’t have the wealth, or wealth-generating capacity to cover a continued growth in debt—or to maintain debt on this scale. We could tax the “super rich” up to their last penny, and, even if they didn’t flee to another country, the amount we would obtain would not cover more than a few months of the debt we are incurring.
We can no longer run government (including our schools), let alone our own households and business, in a “business as usual” manner. On the one hand, cuts to budgets and to social programs, no matter how draconian, will not be enough to address the problems we face; and raising the federal debt ceiling may seem prudent within the halls of the Capitol, but it is simply cowardice. On the other hand, Texas, like most states, has constitutional obligations, including the education of its 4 million students; while the federal government has constitutional obligations, including providing for our common defense—and we just can’t stop meeting these obligations.
Instead, we must stop incurring debt; we must re-structure salary, benefit and pension obligations of public workers to bring them in line with the private sector; we must set priorities for each level of government based on their core, constitutional responsibilities; we must zero-base budget for those priorities; and then we must agree on a fair system of taxation to pay for those priorities. We must find innovative private and local solutions for problems now managed by state and federal bureaucrats—innovations that will involve citizens and the private sector, including private foundations, service organizations and churches. State and federal governments can have a coordinating role to match the right people and organization to the needs of their communities, but these governments should not create, administer or pay for the resulting programs.
What is most needed, though, are leaders who will take the risk to stop this fiscal madness and set the new priorities we need. Some are emerging, like the new Governors in Wisconsin, Michigan, Ohio, Indiana and New Jersey. As leaders like these emerge in Washington, Austin, and locally, they will have a loyal ally and foot soldier in me.
The Middle East
In early February, About Ed Hubbard
