"The trouble with socialism is that eventually you run out of other people's money." -- Margaret Thatcher
Guess what, folks? "Eventually" is here for Greece and it may soon be for Ireland, Portugal, Spain, and Italy as well. So, when does "eventually" come for us? Last week, congressman Mike Pence told me that unless something changes, "eventually" may only be a decade away,
I don't think there's any question that unless we produce national leadership that is willing to confront our mounting fiscal crisis head-on, that America will be Greece within 10 to 15 years.
Does that sound like grim news? Well, it may be optimistic. Last week in a teleconference, Senator Tom Coburn told us he thinks it may only take four years for us to end up in the same situation as Greece.
If the United States can't finance its debt, the government would be unable to pay its bills; we could see runaway inflation, a worldwide economic crisis, a new "Great Depression" -- and unlike Greece, there is no nation or collection of nations big enough to bail us out.
Compounding the problem is the fact that while both political parties have helped get us into this situation, the Democratic Party is run by people every bit as blind to reality as the Greeks who are protesting attempts by their government to control spending. Their country is broke and living on the charity of other nations and their response is to throw Molotov cocktails and riot. Expect to see the same attitude from Nancy Pelosi, Barney Frank, Barack Obama, the SEIU, MoveOn, the Daily Kos, and the rest of the gang that's driving this country's future off a cliff right now.
Back in the real world, we need to start taking serious, painful, and potentially politically unpopular steps right now if we want to prevent an economic disaster that would make our economic woes today look like a vacation at the Grand Canyon. What do we need to do?
Freeze all discretionary spending indefinitely and then start paring it back: The first rule of holes is to stop digging. In our case, we need to simply freeze our discretionary spending for the foreseeable future. The baseline budget? It should be scrapped. Government salaries? They should be frozen until they reach a lower average wage than the private sector
If the government wants to spend more in any one area, including extending unemployment benefits, they should actually have to take that money out of somewhere else in the budget. In other words, PAYGO should actually apply to new spending as opposed to being nothing more than political cover for politicians who want to pretend to care about the deficit. If we go even that far, it'll quite naturally lead to something that's often talked about, but seldom done: slashing fraud, waste, and non-functional programs out of the budget. Let's kill Head Start. Let's stop throwing away money on PBS, NPR, and the National Endowment for the Arts. Let's stop forcing the Pentagon to spend
Finance a much higher percentage of the debt with long-term bonds: Given the increasing worldwide worries about the amount of debt the U.S. is running up and the problems Europe is having, we're able to currently finance our debt at interest rates that are considerably lower than they will be in the coming years. Yet, we're still financing a very large portion of our debt with short term Treasury securities sales. We desperately need to change over as much of our debt as possible to 10-year and 30-year Treasury securities. The downside is that we'll have to pay out higher interest rates; so that will actually increase the deficit in the short term. However, by financing most of our debt over a much longer term, it will keep us from having to constantly turn over our short-term debt at what will likely turn out to be skyrocketing interest rates.
Long story short, at the moment, we don't even know how we're going to pay for our Social Security and Medicare obligations. So, how in the world can we add another massive entitlement program? It's sheer insanity, which is why Obamacare was, is, and remains so deservedly unpopular.
Grow the economy: We hear that the "rich don't pay their fair share." But how can that be when 47% of Americans don't pay any income tax at all? You hear a lot of talk about Washington "creating jobs" and "improving the economy," but the only way they can actually do that is by getting out of the private sector's way instead of demonizing it.
Here's the reality: to get out from under all the debt our politicians have run up, we desperately need to grow our economy. We need to give corporations and the rich an incentive to do business here. As John McCain noted during the campaign, we have the 2nd highest corporate tax rate in the world. We need to cut it. We also need to get rid of the capital gains tax and move towards a flat tax, fair tax, or national sales tax – any of which would likely lead to massive economic growth. Granted, that won't be popular with the people who care more about taking revenge on the wealthy for being successful than growing the economy, but coincidentally, those seem to be the same people who'll happily spend this country into oblivion if we let them.