The “Fiscal Cliff” Debate is not Focusing on What is really at Stake

The problem with what passes for debate over the dreaded “fiscal cliff”, is that it fails to address the real crisis.  That fiscal cliff will be the least of our worries if we do not get a handle on our spending addiction.  This is a theme picked up by Mona Charen in today’s edition of the National Review online:

The incomparable Walter Russell Mead, writing in The American Interest, offered a glimpse into the coming dystopia:

Things are getting worse in San Bernardino. The city filed for bankruptcy earlier this year, but its financial situation has continued to deteriorate. And now with what promises to be a heated court battle over payments to the state pension fund in the offing, further cuts are likely.

Things are getting so bad that at a recent city council meeting, the city attorney advised residents to “lock their doors and load their guns” because the city could no longer afford to keep up a strong enough police force.

Consider also this Reuters story from Greece:

For hours the leader of the Greek journalists’ social security fund had been chairing a meeting about disastrous losses on retirement savings caused by the country’s economic collapse. “She tried to present herself as the fund’s savior and asked (members) to double contributions to 6 percent of salaries,” said one of those present that night at the Titania hotel. Spanopoulou, 58, did not succeed.

When she rose to leave around midnight, enraged fund members first swore, then waded in punching, kicking and tearing at her clothes, according to witnesses. A bodyguard managed to bustle her out of the room, but another group caught her just outside the hotel and gave her a second beating. She spent the night in hospital.

It was a brutal sign of the fury many Greeks feel at the way the country’s debt crisis has dashed hopes of a comfortable old age. Greece’s pension funds — patchily run in the first place, say unionists and some politicians — have been savaged by austerity and the terms of the international bailout keeping the country afloat.

When governments cannot pay their current employees because they’ve gone broke paying pensions to previous employees (among other obligations), you don’t get a “fiscal cliff” or even a bad recession, you get the unraveling of civilization.

That is how Republicans should present the stakes in the budget impasse when speaking to the press. So far, John Boehner has described the president’s proposals as “unserious” and Mitch McConnell has let it be known that he laughed in Tim Geithner’s face. Do either of those responses convince the average voter that something is at stake here beyond Republicans protecting their wealthy friends?

The Cato Institute’s Daniel Mitchell paints a similar picture:

The real crisis is the ticking time bomb of entitlement programs and the welfare state.

This bomb won’t explode this year or next year. It may not even explode for another 20 years. But at some point America will experience a Greek-style fiscal collapse if these programs are not reformed.

It’s a simple matter of math due to an aging population. According to both the Bank for International Settlements and the Organization for Economic Cooperation and Development, the future burden of US spending will climb so high that we’ll be in worse shape than Europe’s welfare states.

Worse than Spain, worse than Italy, worse than France. Our long-run fiscal outlook is even worse than the situation in Greece, according to those international bureaucracies.

A lot of people get upset about the national debt, which is somewhere between $11 trillion and $16 trillion, depending on whether you include money the government owes itself. Those are big numbers — but if you add up the amount of money that the government is promising to spend for entitlement programs in the future and compare that figure to the amount of revenue that the government projects it will collect for those programs, the cumulative shortfall is more than $100 trillion.

3 thoughts on “The “Fiscal Cliff” Debate is not Focusing on What is really at Stake

  1. Unfunded pension/healthcare liabilities at the federal level are, of course, only part of the problem. States’ have similar problems including Vermont whose unfunded liabilities to state employees/teachers currently approximate $3 billion and growing as Vermont continues to underfund these in its annual General Fund budget.

  2. Unfunded liabilities will be the financial death of the United States…and hardly anybody cares right now. Thanks for trying to help sound the alarm.

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