NICK MASSEY
The Edmond Sun
EDMOND —
“Tomorrow, and tomorrow and tomorrow, creeps in this petty pace from day to day, to the last syllable of recorded time; and all our yesterdays have lighted fools the way to dusty death.” Those lines, of course, come from Shakespeare’s “Macbeth.” It speaks of despair. Those words might also be used to describe the despair that many Americans feel as they have watched in frustration the way their political representatives have handled our economic situation and out-of-control deficits.
Now that the November elections are over, we have a great opportunity to change the path were are on. Almost all the candidates who ran for office this year claiming they’d go to Washington and cut the deficit should take a hard look at the proposal by the leaders of President Obama’s “deficit commission.” This, or something like it, is what it takes to walk the walk. One of my favorite movie lines is delivered by Robert Redford at the end of the film “The Candidate.” Having just won election, Redford’s character asks, “What do we do now?”
Everyone likes the idea of cutting the deficit and government debt and everyone likes the idea of lowering taxes. Who wouldn’t? But then there’s that little problem of how you actually do it. Cut government spending but don’t cut my (fill in whatever program that affects you personally.) Cut my taxes but make all the “rich” people pay more. Let’s create jobs but make all those greedy business people pay more because they must be exploiting somebody. It goes on and on. You can’t have it both ways. In fact, you can’t have it either way. Taxes will have to go up AND spending will have to be cut.
The deficit commission offers an excellent starting point for a discussion of deficit reduction, particularly when it comes to tax policy. America’s fiscal mess is real. We are in a difficult situation in large part because we have designed entitlements for a welfare state we cannot afford. And we have used the tax code as a vehicle for special-purpose spending that weakens both the efficiency and fairness of our tax system.
Can you handle the truth? It won’t be pretty. The truth is if we are really serious about getting ourselves out of this economic mess, everybody is going to have to share in the pain. As Edmond Sun publisher Steve Paterson said recently, “no pain, no gain.”
Over the last 30 years or so we have built an economy based on increasing debt, a growing population and a baby boom generation in its peak spending years. Now it’s going the other direction with decreasing debt, a slowing economy and the biggest generation in history slowing its spending as it prepares for retirement. Oh, and let’s not forget that those 78 million people are about to demand their social security checks and Medicare coverage while they live longer than any generation before. We got away with this before because we were able to grow the economy faster than the obligations grew. That game is over and the math no longer works. Get over it and get used to it!
The “deficit commission” recently did a preliminary announcement about some of the things they think might be necessary to at least start fixing the problem. Wow, what a firestorm that caused! It only took 30 minutes before the knives came out and every single special interest group attacked the ideas that affected them. Everybody wants someone else to take the hit. This is just a preview of what the fight will be like. To all our elected and newly elected officials, are you up for the fight? If you really are, you won’t make many friends.
The announcement was a rather sobering tutorial in how far Congress will have to go — not to balance the budget, because the proposal doesn’t do that for 27 years — but merely to get the deficit and the debt back under control over the next decade.
The preliminary plan from the deficit commission touches every budgetary “third rail,” and that’s good. It curbs or ends the home mortgage interest deduction, cuts defense spending and farm subsidies, bumps the Social Security retirement age up to 69, raises taxes by $1 trillion over 10 years and whacks Medicare even more than the new health care reform law. I would say this is just a nice start.
Going after pork and wasteful spending is just a drop in the bucket. Everything has to be on the table. Yes, we will have to make exceptions for the poor and protect the vulnerable in our society. All entitlement programs, including social security and Medicare, will have to be reduced in some fashion. We’ve got to stop using the tax code to direct social behavior and propping up mature industries. Why are there farm subsidies or any business subsidies? The only possible exception might be subsidies or tax incentives to promote alternative energy or something that would benefit us all in the future. Austerity needs to become the new favorite word.
I know that if this actually happens, my taxes are going up drastically and that doesn’t exactly warm my heart. But it’s just part of what we’re all going to have to face if we, as Americans, really want to fix the problem. We’re all in this together. If our political leaders want to solve the problem, this is the message they are going to have to sell to the public. It won’t be easy. I realize I have probably just ticked off about every special interest group and segment of society. Sorry. Did I miss anybody? Oh yes, all of you union people, especially public employee unions, you’re going to need to take a hit too. Nobody gets a free pass.
There, I said it. I just told you what every politician knows and nobody will actually say out loud. I guess that means I can never run for office by telling people what they want to hear and not what they need to hear. For those of you who are in office and representing all of us, I issue you this challenge: “You wanted the job. Now you have it. Do you have the courage to do what is really necessary to fix the problem, even though it will make everyone angry?” Sadly, I have to say “I doubt it.” I hope you prove me wrong. Thanks for reading.
NICK MASSEY is a financial advisor and owner of Householder Group Financial Advisors in Edmond. He can be reached at www.nickmassey.com. Securities offered through Securities Service Network, Inc., member FINRA/SIPC.
