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A government debt is a government claim against personal income and private property – an unpaid tax bill. – Hans F. Sennholz
Excessive spending and inflicting debilitating debt is integral to all modern democracies. Why? Elected politicians institute programs for current voters and shift the debt to future workers, even the unborn. Social Security, Medicare, prescription drug benefits for seniors are prime examples in America.
Five very wise, knowledgeable, and experienced experts from the Hoover Institute warned us of America's gigantic economic mess. George P. Shultz, Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor have all held important positions in the federal government concerning our economic and fiscal issues.
As a quick summary; President Obama has increased our debt by $5 trillion. That's $55,000 in increased debt per American household! Regulations on most aspects of American life and commerce have also increased. In addition, the Federal Reserve has increased our money supply, holds more debt, and distorts banking and other markets.
Ultimately, Americans must repay all our debt. This could easily result in 80% taxes on the high-income earners and 70% for middle-income earners. The Wise Five wrote in the Wall Street Journal:
What does this spending and debt mean in the long run if it is not controlled? One result will be ever-higher income and payroll taxes on all taxpayers that will reach over 80% at the top and 70% for many middle-income working couples.
The Wise Five know America cannot sustain its present spending, regulatory, borrowing and debt binges. America is not in the European death spiral because the dollar is still the world's reserve currency. While America continues to be bigger and better than the rest of the world, but this cannot be maintained with our current levels of spending. Our present binge is extremely dangerous to our ecomony and global standing. As the Wise Five stated:
We risk eventually losing the privilege and great benefit of lower interest rates from the dollar's role as the global reserve currency. In short, we risk passing an economic, fiscal and financial point of no return.
The Wise Five suggest the following solutions to stop America's disastrous governance: stop excessive spending and borrowing, and revamp Social Security, Medicare, Medicaid, education, tax, regulatory and monetary policies. Again, the Wise Five:
Economic theory, empirical studies and historical experience teach that the solutions are the lowest possible tax rates on the broadest base, sufficient to fund the necessary functions of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform.
This is a gigantic transformation of governance. However, America has started the reformation – slightly. The Tea Party Rebellion may not know the details presented by the Wise Five, but We the People know government is corrupt and spending and borrowing must be stopped. Paul Ryan and the House have passed a budget to slow spending and debt. Even better, the Tea Party Budget – compiled by thousands of Americans – reduces spending by nearly $10 trillion in 10 years.
The combination of the Tea Party Rebellion, principled politicians and a budget reducing and reorganizing government is the best hope for meaningful and lasting change. As difficult as this mission seems, remember other governments have made significant changes. New Zealand made gigantic changes in the 1990s. Indiana has balanced their budget and instituted education and personal medical savings accounts. Wisconsin and New Jersey are making significant government reforms. Sweden has reduced the welfare state and cut spending.
All democracies must make significant reforms. As the Wise Five stated:
The need is clear. Why wait for disaster? The future is now.