Baby Boomers need not wallow in recrimination for bankrupting the U.S. government. Neither can Wall Street excesses, poor business decisions by American automakers, or even the costs of cleaning up after oil spills and hurricanes alter the fundamental financial stability of the U.S. government.
Through recessions, wars, epidemics, seismic shifts in the geopolitical landscape, and more, the “full faith and credit of the U.S. government” has remained strong and even unassailable. U.S. Treasury securities are among the safest investments on the planet; hence their popularity with foreign nationals.
So let us not get distracted by hysteria about the current state of the federal budget. Certainly it is buffeted by the recession, challenged by the costs of health care domestically and military operations abroad. But the drastic reductions in services (averaging 19 percent) or sharp increases in taxes ($45 billion over five years) recently proposed by the new Conservative government in Britain are not needed here due to the robustness and resilience of the U.S. economy. It is by no means clear that Britain needs cuts of that magnitude; the British public shows signs of rebellion.
The federal deficit for FY 2010 was $1.3 trillion, 8.9 percent of the gross domestic product, but in pre-recession FY 2007, the deficit was only $161 billion or 1.2 percent of GDP. The past two years have been largely an aberration caused by the recession and the need for federal spending to revive the economy.
Therefore, the best prescription for the federal budget is to stay the course, avoiding sharp reductions in spending or steep increases in taxes. Of course, it is prudent to trim programs that have outlived their usefulness, such as maintaining our oversized cache of nuclear weapons. The cost of deploying troops in Iraq and Afghanistan will decrease as our role there contracts. Farm subsidies to encourage production of crops no longer in demand should be phased out. Unjustifiable tax loopholes, including the mortgage interest deduction, should also be eliminated over time.
We must keep downward pressure on health care costs — not just spending by federal programs such as Medicare and veterans’ health care, but also that of states (Medicaid) and individuals. Social Security needs updating to reflect changes in the work patterns of American men and women. Benefits for spouses, widows, former wives, and beneficiaries living abroad could be trimmed. However, further increases in the retirement age must be limited to high-income workers because workers earning their living through physical labor wear out at younger ages.
Staying the course means that we will have public funds to develop renewable energy sources and reduce carbon emissions. We will be ready to respond to new threats and emergencies, natural or man-made. “Awful-izing” the federal budget picture is a time-honored strategy by conservatives who want to shrink the role of national government beyond recognition. It is important to resist these pessimistic forecasts and protect federal programs that are vital to all Americans.