Saturday, January 8, 2011

From Here to Where?


The good news first:  The 112th Congress was sworn in last week.  Control of the House of Representatives swung predictably into the hands of the conservatives, the "tea party movement" largely receiving most of the credit.  For me, back in March 2010, it all started here first on Utah caucus night.  In the land of Oz (see above), one now hopes at least the brakes have been applied to the dream wishing debt financing for bigger government solutions regardless of the cost.

The Senate remains in control of the Democrats, as does the White House.  The stock market has taken off on a rising trajectory since November, anticipating and relishing the thoughts of gridlock once again. The financial markets love gridlock only because it signals something better than the unpredictability we have witnessed for the last two years.

Senator Orrin Hatch (R-UT)
The 112th Congress began its first session by reading the Constitution on the floor of the House.  Many guffawed at the idea.  By the time it was over, most had left the chamber.  You can call it mere symbolism if you wish, but at least the new leadership is signalling a belief that the inspired document is more than merely a good idea.  It's really the document determining how we are to be governed as a free people.  Orrin Hatch (R-UT) opined this way.

For far too long this country has been polarized into two discernible and seemingly divisive camps.  However, there has been a private and all-too-easy accommodation between the two factions.  Publicly they excoriate one another.  On the right conservatives have advocated self-determination and small government, tax reductions and less regulation.  The left has routinely done everything within its power to form a framework of big government and high taxation to buy delicious wealth redistribution benefits for the 9 - 5 working folks.  The two sides have always had to compromise to some degree to get a little of what each has wanted.

You may not like it, but neither has been able to get everything each wanted, so compromise has been the basis of the accommodation each has made for the other.

We are now left with a "hybrid" bastard child government in many ways.  The right has been unsuccessful in creating free markets for individually-owned businesses as they once envisioned while holding at bay the creeping welfare state, and the left has failed to fully implement a Western European-style socialist government they seem to love so much.  I never dreamed we would ever revisit those socialist ideals, but the last two years have proven they are not dead yet.

Both sides publicly hold their noses, pandering to their respective political base of believers.  The left has compromised on tax cuts, while the right has voted for increased government involvement.  It's nothing more than political kabuki theater at its best.  The compromise strategy has worked brilliantly to perpetuate the perceived value of a long-standing member of Congress for his constituency when he can get himself in a position to "bring home the bacon."  As she exited as Speaker of the House last week, Nancy Pelosi was still blaming everything on George W. Bush -- she apparently believes the Democrats lost control of the House in the November mid-term election because of the bad economy they inherited from Bush.  So far, so good.  Blame the other guys and continue to compromise to get a little bit of what you want.

Turns out, she has little to complain about -- she got EVERYTHING she wanted.  One could make the case her success as Speaker is unprecedented based upon the number of bills passed.

But the future from here is uncertain and unpredictable.  The old ways of getting things done are likely to implode.  Here are some thoughts about why:

Bob Bennett
Here in Utah last year Bob Bennett was soundly and unceremoniously tossed.  He remains a canary in the mine shaft as a harbinger of things to come.  The other long-standing compromiser from Utah, Orrin Hatch, is trying to avoid the harsh judgment of his 36-year Senate career by his constituents in 2012.  I predict he will not be able to survive if the current mood persists, though he is making a valiant last-ditch stand to lengthen out his stay (he would be 84 years old at the end of his next term if re-elected, and would become the oldest Senator ever elected in Utah).  That's tall timber to have to chop.  Bennett couldn't do it and Hatch has  already served longer than any of the twelve U.S. Senators from Utah.  Originally, he ran against Frank Moss, calling him a "career politician."  There will be many willing newcomers anxious to remind Hatch the roles are now reversed and it's time for him to step aside.  I wish Hatch would just voluntarily retire, knowing it will never happen.

Both Hatch and Bennett are emblematic of the frustration voters feel, knowing in our heart of hearts as we do that each was part of the problem -- the "great compromise" between the parties happened on their watch and they enabled it as two old political hands can and must do from a small state.  They went along to get along and survive until the next election.  Business as usual in Washington D. C. has given us the worst case scenario.  What's the worst scenario?  High taxes, bankrupt government, out-of-control spending, and costly entitlement programs as far as the eye can see.  They can say they opposed it all and point to "those other guys" to assuage their base in Utah, but the record says otherwise.

We have a bloated federal government.  There are 2,748,978 federal civilian employees.  Most of them work for the executive branch, and the government is easily the largest employer in America today.  Not exactly what the founders favoring limited government had in mind.

While both sides will say they are committed to a government that only spends what it takes in, there are increasing numbers of voters who do not accept the statements of their elected officials any longer.  Frustration over election year rhetoric not translating into constructive solutions thereafter is at an all-time high.  It's likely the reason Hatch and other incumbents will be added to the rolls of the unemployed in 2012.

Once again this year, attempts will be made to put forward a "balanced budget amendment" if such a thing can even be accurately defined (it failed by one vote in the Senate a few years ago), but perhaps a new beginning can emerge this year.  It remains to be seen.  I remain optimistic.

Ask either side who's responsible for the current deficit and finger pointing from each is all you'll get.  They have been partners in this Ponzi scheme crime of the century in profligate spending, then handing the bill to future generations.  "Pay as you go" government is nothing more than a wink and a nod in Washington.  That's what has got to change, Americans are increasingly saying to themselves.  Both sides created it with their tendency to compromise with each other.  Both sides must accept accountability for their actions.  The voters will be certain they do.


The liberals on the left contend (correctly) that conservative tax cuts contribute to the deficit.  Conservatives on the right assert (correctly) that unrestrained government growth has pushed us into the sprawling ocean of red ink.  Remember when Bill Clinton said, once the deficit reached zero by cooperating with the Republican-controlled Congress, that the era of big government was over?  Uh, yeah, that didn't happen.

The numbers do not lie.  There was a budget surplus for four years during the late 1990s -- unrestricted good budget news broke out, each side claiming credit for that outcome.  Except for those four anomalous years the federal deficit has fluctuated between 1.5 percent to 6 percent of GDP.  Relative to the size of the American economy, historically the largest in the world, that size of a deficit was not enough to give much angst to the green eye-shade people who watch such things.

But something dramatic (I am understating) happened in the 2009 and 2010 federal budgets.  I've been watching, trying to learn, and coming to some sobering realizations.  In those two years the deficit rocketed up to 10 percent of GDP.  Blame whomever you will for profligate spending -- both sides point at each other -- the simple fact is tax receipts plummeted into the basement during those two years.  Linked to reduced revenues flowing into the Treasury, we learned there were $288 billion in tax cuts paired with $500 billion in additional "stimulus" spending.  That doesn't include a $1 Trillion price tag for health care reform that's been added to the fiscal witch's brew.

I believe our reality points to the end of the ying/yang political compromises we have heretofore witnessed.  The left and the right are going to be compelled to change their ways, not because they really want to but because the voters will demand it.  The days of a Teddy Kennedy and an Orrin Hatch making nice to spend more money for social programs must and will come to a screeching halt.  The only question is will there be enough political will among the members of Congress to bring it about.  Will Americans demand the change of direction with their power at the voting booth?

The three biggest segments of the government's spending today involve defense, Social Security and Medicare.  When my father attempted to explain Medicare to his local Rotary Club in a prepared speech when it was first introduced in 1966, as part of the "Great Society" envisioned by President Lyndon B. Johnson, he used language much like what we are hearing today in connection with Obamacare.  Dad's words, "We just don't know what this is going to do to us, only time will tell."

Well, all these years later we are now beginning to understand just how costly medical care has become.  In 1966, Medicare was 16 percent of the annual federal budget.  In ten years (2020) the projection is that number will explode to 40 percent as baby boomers like me continue to flood the system, Obamacare notwithstanding.

Left unchecked, the actuarial assumptions for these socially engineered government "safety nets" for an aging population with fewer worker bees in the hive than ever before are not promising.  Socialism fails to deliver on its promises, because society just can't have it both ways -- the "good life" without somebody paying the bill ultimately.  One would think Europe's experiments with socialism could have taught us that lesson.

As other budget items necessarily get pushed aside to continue to maintain the "big three," the room for compromise will erode exponentially only because it must and there will be few options.  It might be years yet in coming (we always defer the day of reckoning as long as we can), but come it will.  The choices will be simpler -- either raise taxes to sustain social entitlements or lower taxes and reduce the entitlements.  The level of taxation where we finally settle relative to benefits extended will be interesting to observe.

Necessity being slowly forced upon us will dictate the new direction.  That's why the historically great "compromisers" who fathered the current situation like Bennett and Hatch must give way to new members of Congress from both sides who become steeled in their resolve to find a new path together to preserve the Republic through greater fiscal discipline.  The good ol' boy network must be dismantled, the seniority system scrapped, and Constitutionally-directed thinking about smaller government re-enthroned.

I believe the same God who inspired the Constitution inspired tithing and self-reliance.  Adam and Eve were not clutching their Social Security cards as they set about to survive in the lone and dreary world by the sweat of their brow.  Neither were your ancestors when they first set foot upon this protected and preserved continent.  Believing somehow that big government will deliver its solutions in our old age is exactly what our forefathers warned us about, and that premise is foolishness.  We are seeing the realities of big government "solutions" every day.  Despite efforts to impact the number by the government, unemployment rates are dropping slightly (now at 9.4 percent nationwide) only because people are dropping out in their job searches.  Fed Chairman Ben Bernanke is predicting employment will not return to "normal" for another five years.  Those facts should tell you all you need to know about government interventions in recessions.

I'll be watching in the years ahead as one of many who has lived to witness this inevitable train wreck as a baby boomer.  What interests me is how the government benefits I have been promised by a government now unable to deliver as promised will be perpetuated.  It cannot, can it?  Will we step up and responsibly put our government house in order and shoulder the generational debt we have incurred to spare our children the burden it will impose upon them?  Or will we go on raising the debt limit indefinitely, confident America is big enough to pay its obligations forever?

Whatever course we take as a country, political rhetoric from either side blaming the other cannot and will not stand forever.  It must be supplanted by the political will of Americans imposing their will upon their elected representatives to carefully and judiciously dismantle the fiscal house of cards before it falls precipitously on its own.

The big dream of a Government providing a cradle to grave existence without individual toil and accountability is a myth as fanciful as the Emperor's New Clothes.

Those days are over.

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