Suppose you get a one-time bonus at work and decide to buy a car you cannot possibly afford with an incredible interest rate. Because you refuse to worry about the overall cost, you do not apply the bonus as a down payment, or on monthly installment bills that would still fall short of what’s required even if you obtained more money you were seeking, but to purchase additional accessories to please your family.
Before long, of course, the bonus is gone, your debt on the car has grown mountainously, it is eventually repossessed even though you have borrowed to pay off the borrowed money, you are now broke, your family is suffering and yet you have served a noble purpose. You have provided an analogy illustrating what President Barack Obama is proposing in his 2015 budget plan and what its enactment would do to the American public, not least of all to the middle class he pretentiously pretends to adore.
The president’s bonus came in the form of annual deficits being down some now, a projected $474 billion in 2016. That’s chiefly a consequence an energy boom provided by the free market, sequester budget caps he now wants to totally abandon and the fact that it has been a while now since he punished us with a stimulus costing as much as the war in Iraq.
But despite the fact that we have a record-busting $18 trillion debt — the cost of the car, so to speak — he does not mean to begin paying that off but to acquire accessories, projects he calls “investments.” Actually, they are spending increases he would like to finance at least partly by tax boosts including more on capital gains, thereby reducing crucial private sector investments, even as borrowing remains a major part of the picture.
The smaller deficits are due to go up again by 1918 and could easily reach $1.1 trillion a year by 2025, according to expert analysis. Something like $6 trillion could be added to the overall debt over the same 10 years if nothing is done about Social Security and various health programs for the elderly giving us what some call a fiscal gap. This refers to the difference between the cost of these programs and the revenues to fund them. It is huge, in the multitrillions thanks to the shenanigans by which politicians have irresponsibly misshaped benefit formulas and funding mechanisms.
Without a focused attack very, very soon — careful restructuring of the programs, tax reform, regulatory retreat and tough-minded austerity — the future is gloomy, a place in which misery wrestles prosperity to the ground. But Obama mindlessly calls austerity “mindless” even as astute analysts such as Michael Solon writing in the Wall Street Journal give us the data-driven facts: Time and again tax cuts and spending inhibitions produced far better economic results than tax hikes and Obama-style spending adventures.
As an example of malevolent charity, look at federally underwritten student loans leaving thousands of graduating students with a crippling average of $26,000 of debt as they begin their working lives. The total owed is over $1 trillion and what the program has mainly financed is tuition and fee inflation. Now Obama wants to make community colleges free even though Pell Grants already make them free for the poorest student, they already cost little more than $3,800 a year and a whole lot less for the large numbers who go part-time. Obama sees the move as an enormous boost for millions even though the 10-year cost would be $60 billion, part of an overall spending strategy that could so wreck the economy down the road that even the most brilliant Ph.ds might be lucky to find work.
The American family, in short, would suffer under a plan that does, it should be said, have some good in it along with all the bad ideas that will, of course, be denied by a Republican-controlled Congress. The shame is that so much of it had to be extreme, political and combative instead of constructive and statesmanlike, paving the way to a better future.