Friday, May 05, 2006

"Fiscal Wake-Up Tour" Summary: Part 2

(Part 1, covering the first few speakers and links to their presentations was posted May 2)

One issue that was brought up during the panel discussions is the common misconception that there have been harmful cuts in spending for programs. In fact, there have been cuts in growth of spending, eg a program might be slated to have an increase in spending of 7.4% and might be "reduced" to an increase of 7.1%, but the media and opponents label the 7.1% increase in spending a "cut".

Alison Fraser, Director of the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation, gave an especially compelling presentation. Currently her presentation does not appear to be among the list, but the Power Point presentations of two of her collegues from the Heritage Foundation who have been on previous tour stops are available. These gentlemen are Stuart Butler and Brian Riedle.

Ms. Fraser discussed the three ways Congress could bring the federal deficit under control. One idea was to raise taxes, making us more like Europe, but there would be serious consequences for doing so. Currently, if Europe were one of our states, it would be the fifth poorest. To raise taxes as much as would be necessary to meet spending could bring about that same kind of economic stagnation. A second option, to continue financing our debt, is unthinkable because we would soon be unable to afford the interest.

The third choice, spending cuts, seemed to make the most sense, although there will be some very tough choices. Ms. Fraser showed a series of graphs with each successive one removing some item from the budget. As the National Endowment for the Arts, NASA, foreign aid, and pork (as in a bridge to nowhere) were removed, little difference was noticeable. Even if all defense spending was eliminated, there would be an insignificant difference in spending. As previous presentations had demonstrated, it is indeed the entitlement spending (SS, Medicaid and Medicare) which are the biggest portion of our budget woes and are only going to increase in proportion of the budget. Some way to cut these programs will need to be devised, I fear, in order not to go bankrupt as a nation. This will be hard to do as no one wants to touch these programs, but it is in the best interest of the nation to question places where spending here can be reduced perhaps beginning with reducing payouts to people who may not need them based on personal wealth.

The last presenter was Joe Minarik, Senior Vice President and Director of Research from the Committee for Economic Development. His presentation began with a humorous quote from Ronald Reagan, "The federal government would be bankrupt if not for the printing press." His focus was on the amount of debt being financed by foreign countries and the several drawbacks to depending on foreigners to bankroll us. One obvious problem is what to do if foreigners choose not to finance us at current levels. This could cause interest rates to rise preciptiously for Americans. Also, with foreigners lending us more and more money, our moral authority could be greatly compromised. It is difficult to imagine a U.S. trying to pressure some of the governments of the world which are extreme in their violations of human rights when we depend on them to keep us afloat.

While it will probably be time consuming to examine all their presentations, please do so if at all possible. The only way to bring this massive conundrum to heel is if we, the citizenry, become informed and then pressure our representatives to make real changes. They will take their cues from us and will not be likely to risk the ire of the populace by making significant changes unless they sense we are firmly behind them.

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