Think big: It’s our only option

posted at 7:12 pm on April 19, 2011 by J.E. Dyer

As usual, I liked Kevin D. Williamson’s piece at NRO today on the real drivers of federal deficits (hint: not tax cuts, not wars, not bailouts).  Among several gems, he comes up with this one, on the effects of government control of economic sectors:

The only important products in the United States that do not get better and cheaper every year are K–12 education and health care, which are about 97 percent and 55 percent dominated by the government, respectively, and therefore have little consumer-price pressure.

I would have said health care was more like 75% dominated by the government, but the point is the same, and extremely well made.  He says this too, however:

A study from Credit Suisse puts the net value of all the financial assets in the world (excluding real estate) at about $80 trillion ($117 trillion in financial assets minus $37 trillion in household debt). Our unfunded entitlement liabilities are about $100 trillion. Given that they exceed world financial wealth, I suspect that those liabilities are not going to be met.

This is where I have to part company with him – and with, as far as I can tell, at least three quarters of the commentators who write about these things.  There’s an obvious reason to criticize his conclusion: current global wealth, tallied up in a snapshot of 2011, is not what we will have available in the future, when America’s unfunded obligations come due.  Those $100 trillion in unfunded entitlements will come due over time.  They are projected out for decades; we don’t have a $100 trillion bill coming due tomorrow.

But this factor isn’t my main reason for disagreement.  It does, however, highlight the basis for my rejection of the widespread, pessimistic conclusion that, basically, we’re doomed.

Before getting into that, let me clarify that I take the deficit problem seriously, and I don’t think we can postpone dealing with it.  Same goes for the unfunded entitlements problem.  Suppose, just for discussion purposes, that the $100 trillion facing us right now came due in increments of $1 trillion a year for the next century.  The government is already spending over $1 trillion more per year than it’s getting in tax revenues.  We obviously can’t handle another $1 trillion per year.  There’s no question this has to be dealt with – now.

And we do need to cut current discretionary spending and reform Social Security and Medicare.  We need to reform unearned benefits programs too: Medicaid, welfare, food stamps.  All these reform measures are indispensable.

But cutting expenditures is only half the equation.  If we only cut expenditures, we will be leaving ourselves inside a box of our own making – accepting a “pie” whose maximum size has been dictated to us by decades of government policies, and proposing only to cut everyone a smaller slice.

This is quite possibly the most stupid, shortsighted, inexcusable thing we could do, as we stand at the parting of the ways in 2011.  The world could have so much more wealth, in the next 50 years, than projected by the Credit Suisse study, if its people were allowed by the government policies on seven continents to produce and profit according to their interests and abilities.

Policies are holding people back in numerous ways, from the endless terrible tribal wars in Africa to the repressions of Islamism and sclerotic statism in much of Asia and Europe.  Consider the millions of young, able people living on government benefits in the Western nations.  Instead of producing, sustaining themselves, enriching their communities and nations, and – yes – paying taxes, they are idled resources.

Millions more are recently unemployed and looking for work – people who would resume their status as producers again tomorrow, if they had the chance.  Government policies bear a huge portion of the blame for putting them out of work; and they, again, are idled resources.

How many now are only marginally fit for productive work because they are graduates of the American public school system?  They are accomplished at regurgitating propaganda, but have not been trained to think critically, and have little experience with challenge, failure, and perseverance.  Too many younger Europeans, Canadians, Australians, etc fall into these categories as well.  Almost all young people blossom as producers and grow in sturdiness and character, if they are set the right example, given better principles, and required to perform.  But we have turned too many of them into underemployed resources.

How many people around the globe – some of whom are the unemployed, no-longer-looking-for-work in the US – would start small businesses and add to the sum total of productivity and wealth, if the obstacles of regulation and taxes were not so steep?  In how many nations would the economy take off like a rocket if real property laws were fair and better codified?  If bureaucratic corruption and sloth were reduced?

Granted, there is only so much we can affect outside our own borders.  But in terms of affecting foreign-government policies through our example, we are headed the wrong direction:  making it too expensive to do various kinds of business here, increasing the size of the entitlements state, and closing off economic sectors with regulation.

Consider that we would have enormous additions to our national wealth, kicking in with a vengeance 3-5 years from now, if we would simply drill for oil and gas where government decisions now prohibit doing so, improve our indigenous refining capacity, resume a friendly regulatory attitude toward coal, and allow the development of tar sands and shale oil.

The US has millions of acres of federal land that could be sold and put to productive use – and we could sell millions and still have millions left for conservation.  I’m not a dyed-in-the-wool libertarian in this regard; if it were up to me, I would continue to retain some lands under federal administration, and I wouldn’t sell off public land to foreign interests.  American buyers only (well, OK, maybe Canadians too), and I mean checking IDs and doing forensic investigations of business relationships.  But the point is that these lands are idled resources – or, in some cases, resources that can be idled at any time, on the whim of a federal judge and at the behest of activists.

It’s worth noting that there are tremendous tracts of productive land, all over the face of the earth, that have yet to be put under cultivation or set to organized human use.  Trillions in wealth is sitting unclaimed under our feet.

None of this means that we should have no regulation at all.  It is sophomoric to react as if that’s what I am proposing.  But one of the best resets we could give ourselves is eliminating the regulatory discretion of federal and state agencies.  Any form of regulation that will affect business costs, economic viability, and consumer prices – and virtually all of them do – should properly be imposed only if a majority in the legislature agrees, point by point and regulation by regulation.  This will make it harder to impose regulations, yes.  Exactly.

The ways in which regulatory clamps on productivity keep our resources idled pervade every facet of society and the economy.  We have got to start recognizing this regulatory straitjacket for what it is, and realize that the reason we don’t expect to have the $100 trillion we need over the next 70 years is that we insist on constraining ourselves by a network of rules that idle our resources.  (And, for that matter, divert them into compliance activities, which is an entire post of its own.)

Yes, reform entitlements.  That absolutely must be done.  We’ll be better off if our entitlements burden is whittled down as far as possible, and I don’t think cutting it by 90% is too much to shoot for.  But the way we get there, politically as well as practically, is by unleashing the productivity of the people and letting them decide what to do with their wealth.  A people that is providing very nicely for itself will not miss the $90 trillion the US federal government was never going to be able to “transfer” to it anyway.  And we’ll be better off for every foreign economy and every foreign citizen whose governments’ policies allow them to journey down the same path.

J.E. Dyer blogs at The Green Room, Commentary’s “contentions” and as The Optimistic Conservative.  She writes a weekly column for Patheos.

This post was promoted from GreenRoom to HotAir.com.
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Copy Chile, privatize Social Security. Problem solved eventually.

It would also help to seal the border and eliminate automatic citizenship when illegals download on our soil.

karenhasfreedom on April 19, 2011 at 7:26 PM

If we had the entrepreneurial and regulatory climate of Hong Kong or Singapore, the USA could once again regain its original greatness.

mydh12 on April 19, 2011 at 7:28 PM

That’s a great read and she makes some sound observations and suggestions. I fear though, the “masses” may be too far engrained in the already over-governed and regulated state we live in.

Put mildly, it’s a hell of a hill.

Tim Zank on April 19, 2011 at 7:33 PM

WE ARE BROKE and BROKEN! We have 537 elected representatives in DC that haven’t been able to fix social security, medicare, the USPS or even Amtrak to name a few over the last few decades. Who here actually believes they are going to fix the deficit problem in our lifetime? Seriously?

dddave on April 19, 2011 at 7:37 PM

Did I miss the part about drilling for our own oil…?

/

Seven Percent Solution on April 19, 2011 at 7:37 PM

The only important products in the United States that do not get better and cheaper every year are K–12 education and health care, which are about 97 percent and 55 percent dominated by the government, respectively, and therefore have little consumer-price pressure.
=============================================

Me thinks your dead-on accurate,and very well nailed!!

I present,straight out of the “Peoples Budget”,from
the Progressive Caucus Proposed Budget!!
—————————————-

Putting America Back to Work and Restoring American
Competitiveness
****************

Education In addressing the nation’s long-run fiscal challenges, investments in education enhance
the long-term growth potential of the economy by investing in the skills of our present and future
workforce.

The nation’s human capital can be increased in many ways, including through formal and
informal education, experience gained over time on a job, and training in the workplace.

Front-end
investment in Pre-K, K-12 and higher education is the most important contribution we can make
to our economic growth in the long run. A more skilled workforce can produce more, and
higher-skilled workers tend to earn higher wages.
————————————————–

Function 550: Health (10% plus-up)
*********************************

• Domestic HIV/AIDS
• Maternal Health
• Enhanced Federal Medical Assistance Percentages (FMAP)
• Community Services Block Grant (CSBG)
• National Institutes of Health (NIH)
• Global Fund to Fight AIDS, Tuberculosis, and Malaria (The Global Fund)
• Mentoring of Children of Prisoners
• Community Health Centers
+++++++++++++++++++++++++++++

The People’s Budget
Progressive Caucus People’s Budget FY12 Memorandum
Eliminates National Deficit by 2021
Read the People’s Budget
=============================

Read the People’s Budget

http://grijalva.house.gov/uploads/The%20CPC%20FY2012%20Budget.pdf

canopfor on April 19, 2011 at 7:40 PM

Dead on!
The problem is not what the Federal Government COSTS, the problem is what the Federal Government DOES.
If Paul Ryan were successful beyond his wildest dreams and every single detail of his budget were enacted today, the only thing he would have achieved would be to save socialism from itself. We’ve got to start amputating programs and functions and departments from the Federal monster. Just making each function more efficient by forcing it to survive on less input, defeats everything we need to do.

Lew on April 19, 2011 at 7:46 PM

Our unfunded entitlement liabilities are about $100 trillion. Given that they exceed world financial wealth, I suspect that those liabilities are not going to be met.

I cringed when I read this. I tend to judge people (esp. budgeteers) by their handling of numbers. I seriously can’t understand how someone who seems to be a straight shooter can misunderstand this

r keller on April 19, 2011 at 7:49 PM

Did I miss the part about drilling for our own oil…?

/

Seven Percent Solution on April 19, 2011 at 7:37 PM

No, you didn’t, but I’m glad you brought it up.

Ultimately, all wealth is created through the harvesting of resources from the earth, be it corn or coal.

Everything else is dependent upon these activities in some way shape or form.

I make my living in the service sector. I do not manufacture anything, but use things that are manufactured (fertilizer, diesel fuel, plastics) that are directly harvested from Mother Earth.

Get government out of the way of private enterprise and we will be able to right the ship.

And by out of the way I mean a wholesale cleaving of huge portions of the Federal and State governments.

turfmann on April 19, 2011 at 7:54 PM

Dead on!
The problem is not what the Federal Government COSTS, the problem is what the Federal Government DOES.
If Paul Ryan were successful beyond

Lew on April 19, 2011 at 7:46 PM

Lew:)
======================================

The Path to Prosperity: America’s two futures, visualized
Added by OC GOP on April 6, 2011 at 6:46pm
*******************************************

This 3-minute video is a visualization of the House Republicans’ budget, “The Path to Prosperity,” presented by Rep. Paul Ryan, chairman of the House Budget …

http://ocgopaction.ning.com/video/the-path-to-prosperity

canopfor on April 19, 2011 at 8:04 PM

Pappy Plan enactment would be a great start.

1. Seal the Border

2. 10% across-the-board Federal spending cuts.

But……..no one in DC has the stones to even cut a few Billion.

? For HotAirians……….will the IMF even be strong enough to get the DC politicians to stop the spending?

Will we have to give China and India ALL the energy resources the US has to pay off the debt (like the push in 2010 to get Greece to sell some of their islands to pay their debt)?

PappyD61 on April 19, 2011 at 8:06 PM

Let’s add a few to the list of things that don’t get better and cheaper over time: 1) Higher Education, 2) Autos (foreign cars excluded – but we’re talkin’ US), 3) Movies.

Movies doesn’t really fit in the list but is generally run by those who believe in really big gov’t and redistribution of everybody else’s wealth but theirs, so maybe it does fit.

Pablo Snooze on April 19, 2011 at 8:06 PM

Did I miss the part about drilling for our own oil…?

/

Seven Percent Solution on April 19, 2011 at 7:37 PM

Seven Percent Solution:————————–:)
—————————————————-

*Knock..knock..at the front door*…”Bitter/Clinger…
the bus is out front….Camp GOP,or Camp Tea …..,
most excellent choice,you will join the rest of you
trouble-makers that have an IP address to Hot Air,
and they serve Red-Rose tea,at Camp Tea.

Enjoy….Re-Education!!(Lots of snark):)

canopfor on April 19, 2011 at 8:10 PM

These things ALWAYS ignore the ASSETS of the United states…

Gold, silver, Oil coal, Natural gas, WATER, rivers, lumber, transportation, the American Mind, and on and on…

Phooey on the whole thing…
We could start from SCRATCH and beat 90% of the planet in 6 months.

Just put Sarah in, get rid of urkel and his ilk, and we’re off to the races on an interplanetary scale!

golfmann on April 19, 2011 at 8:44 PM

I vote for canopfor for a spot blogging in the green room at HA. :)

maineconservative on April 19, 2011 at 8:46 PM

“Yes, reform entitlements. That absolutely must be done. We’ll be better off if our entitlements burden is whittled down as far as possible, and I don’t think cutting it by 90% is too much to shoot for.”

Bingo. SS needs to become a welfare program for seniors in need, forget paying bucks to retired millionaires. Promote private market based pensions, eliminate defined benefit plans so everyone (including politicians) are market sensitive.

As for Medicare, simple — allow doctors to deduct the cost of unreimbursed charity care (for seniors and anyone else) from their income. Clinics will quickly figure out that getting paid 40% or less by Medicare and Medicaid is about the same as providing the care as tax deductible charity. Quickly, they’ll figure out how to develop sliding scale programs for those in need so those who can pay some, do so. Yes pretty soon, you’d have health care providers paying little to no income tax and everyone getting top quality care, not red tape limited bureaucrat care. Go figure — the Medicare and Medicaid problems would be gone too. This could happen even if these Entitlements were left in place. Who would want red tape gubermint entitlement care when charity care would be better?

This points out that it’s health care isn’t provided by politicians, it’s provided by doctors, nurses and more… Get government out of the way and let the private sector solve this issue!

FYI, many people may think charity care is tax deductible. It’s not. Microsoft can donate millions of software to schools, tax deductible. A clinic can’t donate one exam as tax deductible.

drfredc on April 19, 2011 at 8:51 PM

President Palpatine……….with thunderous applause.

:-)

http://www.youtube.com/watch?v=FblQR8ZeUpQ

PappyD61 on April 19, 2011 at 8:59 PM

President Palpatine……….with thunderous applause.

:-)

http://www.youtube.com/watch?v=FblQR8ZeUpQ

PappyD61 on April 19, 2011 at 8:59 PM

PappyD61:WEll played:)

canopfor on April 19, 2011 at 10:12 PM

Deregulate, and pay off debt.

I would say that some regulation needs to be put back, i.e Glass Steagall. Other regulation needs to go for sure.

I pay into SS so I am entitled to it just like everyone else that does. For this, the one question that needs to be asked of every is where is my money that I have been paying out of my paycheck all these years. Do not tell me there are Treasury bonds in there. That is like in Dumb and Dumber, telling the bad guy to to hold on to the receipts, they are as good as money. The fact is the money was stolen and they put I.O.U’s there. Basically saying “Hey were good for it.” What needs reform in SS is the fact we have been robbed and that money need to be put back. Privatizing social security it does not change the fact that the money was stolen in the first place. They should abolish it all together and pay the money back to the people what they payed it.
I love how they send me that statement saying how much money I have in there.

As far as the debt goes. It cannot be payed off. What is in question is the ability to service the debt. For an individual it is good thing to pay off debt, but for a .gov you cannot do it. Why? Because the money supply would dry up. This is why there is no bail out for the “people”. If the .gov payed off the peoples private debt instead of giving the money to the banks you would have massive deflation in the money supply.

When you have a debt money system all money is created into existance via debt. You can cut all the spending you want and raise taxes to 100%. Does not matter. Once the debt service out strips the money you can take from the people it is game over. If interest rates rise this thing will blow up.

The Bernak will do anything to keep rates low. He will monetize us into the Weimar republic if he has to because once rates go up its done. Either way it ends bad. Very High/Hyper Inflation or rates go up and out right default. This is what it will come to eventually.

The U.S. debt is one huge Option ARM. You can get by until the rate goes up. Then its game over. It is not just us it is the whole world.

This is why at Davos they were saying the world needs 100 trillion of new debt, lol. Have to keep the game going.

What needs to happen is Monetary reform. We can talk about what need to be cut, there is a lot that needs to go for sure, but nothing will change if we stay in this debt money system. There is no reason a sovereign .gov should have interest tied to the money it issues. We should be issuing debt free money via the U.S. Treasury. Take that money and pay off the debt and issue money in proportion to the expansion of the economy.

Octavia on April 19, 2011 at 11:10 PM

True, Ryan’s plan only differs from other “kick the can down the road” stop-gap measures in that it kicks the can a bit farther than most.

I regard it as a starting point for discussion. It has ZERO chance of being enacted past Reid and Obama anyway; it was always dependent upon us sweeping in 2012 to be able to pass any serious solutions.

Adjoran on April 20, 2011 at 12:13 AM

J.E. I beg to differ and agree with Williamson that we the United States of America have shown no intention to pay off our unfunded liabilities and are the single greatest credit risk in the world. Too many folks are on the wagon, and precious few pulling it. The tax code will never be reformed because it favors the oligarchs and the budget will never be cut because for now the dollar is the world’s reserve currency (although BRAC are working to change that).

Look at the budget deal. After winning a near record 64 seats in the last election, the best our minority party could do is cut 352 million? It seems that both parties enjoy the benefit of deficit spending and we will until the IMF says it is closing time. The window of opportunity is closed and the American people are more concerned about the NFL labor dispute than the debt crisis, for good reason, a majority work for government and a near majority pay no federal taxes. Take the short side, bet on QE3 and an Obama re-election.

Angry Dumbo on April 20, 2011 at 8:04 AM

The sheer size of the government is one of the problems as well. My daughter works as a civilian contractor in a federal government office, and everyone there comes in at 10:00 and leaves at 4:00 because they know there’s not enough work to keep them busy for a full 8 hour day. Oh, and did I mention that they all take an hour for lunch as well? There are government employees and several private contractors in this office, but they all “work” only 4-5 hours per day and on the taxpayer’s dime. My daughter constantly tells me that she is bored and that they could get all the work done with 1/2 the people. But entrenched feds are hard to get rid of.

College Prof on April 20, 2011 at 9:06 AM

YES AMEN YES

DE-REGULATE untie the american peoples hands and let us produce, create, and do new free thinking business again.

Can anyone imagine Einstein today trying to setup and sell his new invention electricity to the people in todays America? He literally ran electrical lines down the streets of NY to customers tied off on the city street lights. No EPA inspections, environmental surveys, multi year investigations into the human effects of being near power, OSHA, scared nanny safety regs, Federal/State/County licensing etc…etc…

Who is pushing this in our candidates and if not WHY.

C-Low on April 20, 2011 at 10:10 AM

Think big: It’s our only option

by J.E. Dyer

This is one of the best pieces I have read from J.E.Dyer and I hope not to detract from it’s excellence by noting an omission that is as valuable as all our resources combined. That would be our population, we need our young people to reproduce without worry or condemnation from the over-population fear mongers. If and when those natural resources are opened up we need the human element in abundance to do the work.

fourdeucer on April 20, 2011 at 10:14 AM

Did I miss the part about drilling for our own oil…?

/

Seven Percent Solution on April 19, 2011 at 7:37 PM

Apparently. It’s in there.

Consider that we would have enormous additions to our national wealth, kicking in with a vengeance 3-5 years from now, if we would simply drill for oil and gas where government decisions now prohibit doing so, improve our indigenous refining capacity, resume a friendly regulatory attitude toward coal, and allow the development of tar sands and shale oil.

J.E. Dyer on April 20, 2011 at 2:58 PM

fourdeucer on April 20, 2011 at 10:14 AM

I agree, fourdeucer, that we would be a better, happier, and more productive society if young people in their childbearing years were more apt to marry and have children.

Obviously, this isn’t something government ought to be “nudging” people into. But government shouldn’t discourage it either, nor should it encourage “alternative lifestyles” with either propaganda or subsidy.

That said, one of the obstacles to the tradition of marrying young and having multiple kids is the weight of government on the cost of living. We’re not in the bad shape Europe is yet, where too many people in their 20s and 30s can’t even afford to move away from Dad and Mom. But we’re getting there.

In some of the major urban areas, the cost of living is genuinely prohibitive for young couples looking to have kids. There is often a big tradeoff between living near work and having kids — and if you do the latter, you consign one or both parents to extremely long commutes, as the need for space, good schools, and safety from crime drives parents to the suburbs.

A lot of people want to put off having kids and do things like travel, etc, and that is no one else’s business (although their own parents are entitled to the lifelong privilege of nagging them about it). The point here is not that anyone should be harangued or shamed into having kids.

But very often, professional DINKs are in the forefront of the political movements that make it so expensive and difficult for their contemporaries to have the basics of life and yet also get married and have kids.

Getting government OUT of our markets — for housing, health insurance, fuel, utilities, etc — is the answer. People who want life to be expensive and childless have every right to their opinions and lifestyle options. But they don’t have the right to use regulation to ensure that other people’s preferred lifestyles become too expensive for them.

J.E. Dyer on April 20, 2011 at 3:20 PM