There are forces in play in 2011 that make for the perfect storm. How we face it in 2011 will determine the future of America.
One thing is certain, the great game of life in America is about to change. Deficits are skyrocketing at the state and federal levels. Our politicians have over-promised, and the government cupboards are bare. Unemployment has remained high, the economic recovery has been slow in taking off, and few politicians have wanted to face the stark budget realities that now exist.
The U.S. government has fallen deeper into the red in fiscal 2010 with net liabilities swelling as commitments on government debt and federal benefits rose. The latest U.S. Treasury Financial Report shows government’s liabilities exceeding assets by $13.473 trillion. That’s over a $2 trillion increase from the $11.456 trillion gap at the end of 2009.
At the state level, many states are close to insolvency. California bucked the national Republican trend going Democrat across-the-board in the November election. Jerry Brown has promised not to raise taxes without the vote of the people, but he’s already brought stakeholders together to stress California’s budget challenge. Governor Brown asserts that the state deficit may hit $28 billion for the 2011 fiscal year, and the state controller warns of IOUs.
To make matters worse, many cities have already declared bankruptcy over exploding employee pension commitments. More are in line to do the same.
But we face 2011 with a mix of optimism and dread. The players in control have changed in Washington and in many state governments. President Barack Obama is calling for compromise and cooperation, but Republicans were elected to curtail the deficits, stimulate the private sector economy, and decrease the size and cost of government. One side wants to drive the economy on the left side, the other the right. Compromise leaves you straddling the center divider with no progress. We need new solutions, not compromise.
The “lame duck” compromises produced some “wins” for the “Comeback Kid” president. Early indications of Republican courage are disappointing. Yes, they rallied to reject the $1.2 trillion omnibus spending bill, but settled for expensive, deficit-expanding compromise on the tax plan, extended the unemployment benefits, and launched a new entitlement plan for 9/11 first responders when they could have negotiated better deals in January.