America is not broke

By Harry Stein
March 31, 2014

“We’re broke.” House Speaker John Boehner (R-Ohio) and Tea Party groups have repeated that phrase so frequently that it must be true, right?

But America is not broke. Our short-term budget outlook is stable, and our long-term challenges are manageable if both sides are willing to compromise. So why would politicians falsely claim that we’re broke? To justify radical changes to our nation’s social contract that Americans would never accept any other way.

This may be surprising, given how much we hear about a looming “debt crisis.” But annual budget deficits have fallen by almost two-thirds over the past five years. The total national debt is actually projected to shrink in each of the next three years as a share of the economy.

Exaggerating our debt does not advance smart fiscal policies. It does, however, undermine the social programs created by the New Deal and the Great Society by making their successes appear hopelessly unaffordable and doomed to failure.

If our debt is out of control, then Social Security, Medicare and Medicaid would seem like unrealistic pipedreams. Feeding the hungry, rebuilding our infrastructure and educating our children would sound like nice ideas, but too much for the government to handle.

That’s where the Republican budget comes in. For the past few years, House Republicans have passed a budget that radically reduces support for healthcare, economic opportunity and a safety net for hard times. By claiming to address an urgent “debt crisis,” it dismantles the social contract that Americans have made with their government for decades.

These Republican budgets replaced Medicare with a voucher to help pay for health insurance. But that voucher would fail to keep up with the rising cost of healthcare, so those expenses would just shift from the government to senior citizens. Many elderly Americans would no longer be able to afford healthcare, which was why President Lyndon B. Johnson and Congress passed Medicare in the first place.

Medicaid beneficiaries fare even worse. Recent Republican budgets have sought to repeal the Affordable Care Act’s Medicaid expansion and then cut what is left of Medicaid by roughly one-third. Millions of the most vulnerable Americans would lose their health insurance.

Last year’s Republican budget also required enormous cuts to education, research and infrastructure, all of which are responsible for widely expanding economic opportunity. These cuts would have been so destructive that the House Republicans would not be able to follow through with specific spending bills that would have implemented their own budget.

It is true that the United States has long-term fiscal challenges. But these problems can be solved. An aging population and rising healthcare costs will make Social Security, Medicare and Medicaid more expensive. Today’s tax code is inadequate for our national needs. A balanced mix of spending cuts and tax increases, as proposed in a Center for American Progress plan,  would address these long-term budget challenges.

Bipartisan proposals from the Bowles-Simpson and Domenici-Rivlin commissions also use this balanced framework.

We need to cut spending by slowing the increase of healthcare costs. The good news is that healthcare cost growth has slowed dramatically over the last few years, which may be due, in part, to the cost control provisions in the Affordable Care Act.

But there is more work to be done. President Barack Obama’s budget proposes additional changes to federal health programs that would cut spending by more than $400 billion in the next 10 years.

We cannot stop the population from aging — which is why politicians will need to look to our tax code if Social Security, Medicare and Medicaid are to survive for future generations. The federal government now loses more than $1 trillion annually because of the many tax breaks, loopholes and subsidies created by Congress over the years.

Some tax breaks are worthwhile. But many others flow primarily to the wealthiest households — the people who need government assistance the least. For example, low tax rates for capital gains and dividends increased the budget deficit by $161 billion in 2013. The bulk of that money — 68 percent — went to those with incomes in the top 1 percent.

With a bit of compromise, the triumphs of the New Deal and the Great Society can remain a cornerstone of American economic security for generations to come. But instead of compromising, the loudest proclaimers of national bankruptcy are often the same politicians calling for the deepest cuts to Social Security, Medicare and Medicaid.

America is not broke. Politicians who claim otherwise are just using scare tactics to sell an unpopular, unnecessary and deeply destructive conservative agenda. Don’t buy it.

 

PHOTO (TOP): Representative Paul Ryan (R-Wis.) attends the Faith and Freedom Coalition Road to Majority Conference in Washington, June 14, 2013. REUTERS/Mary F. Calvert

PHOTO (INSERT): Representative Paul Ryan (R-Wis) (2nd L) speaks at a news conference about debt relief legislation with Majority Leader Eric Cantor (R-Va.) (L), Representative Cathy McMorris Rodgers (R-Wash.) (2nd R) and House Speaker John Boehner (R-Ohio) (R) at the Capitol in Washington August 1, 2011. REUTERS/Jonathan Ernst

 

26 comments

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America is not broke because we have our own non-convertible, sovereign fiat currency. The US can/does make its own money and has complete control over said money. This article is good…. but it needs to go one step further and actually explain what a “deficit” and “debt” REALLY means in the context of a sovereign currency issuer. Our main concerns are merely the blowing of bubble due to serious misallocation and inflation.

Posted by TwoUnderPar | Report as abusive

is the US going broke? no. unless you think that back when the built the interstates, with a smaller population, and a lot less wealthy country was also going broke, when it built those interstates. now we have many show seem to think we can’t afford to even maintain them. seems like we have more wimps than leaders. and too many want to play politics to what they want as opposed to do any thing for the majority of Americans. and how many dont owe more on their houses than they make in any year? can you say all of them with mortgages, or why would they have taken out a loan to get the house? and did any body know that a lot of Fed’s deficit is owed to it self?

Posted by willid3 | Report as abusive

The US is indeed broke. While looking at the federal deficit and debt is important, it is more important to consider all credit market debt, currently sitting north of 350% of GDP. To this add the enormous trade deficit: once those dollars leave the country they can no longer be taxed. Before rampant globalization the government could levy lower tax rates on many more transactions as the butcher paid the baker paid the cobbler . . . in a manner where the entire closed loop benefited and grew. Nowadays the money goes from paycheck to BigBox to HQ to China while the goods flow from China to a US landfill on short product-life cycles and the need to be “current”. The government needs to take a big swipe at the money any chance it gets because that money disappears from US shores quickly. Add to this leaking bucket our aging infrastructure replete with its shag carpeting, black and peach tile, and big hair. We need better than 15 million barrels per day of oil just to get to work to move pixels around a screen, hardly productive activities. Half of that oil is imported at $100+ each barrel, adding to the trade deficit, adding to the debt, but giving no more utility that the $20 oil of ten years ago. So here we are, a nation of debt slaves, beholden to our financiers, and for what? Everyone knows the hand that gives is stronger than the hand that receives. Joe Citizen knows this and is not surprised as more and more laws that favor the extenders of credit at his expense are passed to keep the gravy train rolling and to protect those very elite from Joe Citizen himself. To think massive debts, erosion of freedoms, growth of the police/surveillance state, excessive waste/pollution, diminishing natural resources, and the general malaise that permeates Main Street nowadays are not all intimately related, one causing effect of the other feeding back to the original causes in a death spiral of financial and economic weakness is pure folly, with debt as the centerpiece.

Posted by Steverealist | Report as abusive

America is not broke? Yea right. Then explain why I have not been able to find a job after putting in hundreds of applications.

Posted by commentorr | Report as abusive

The US population has risen from a stable 200 million in the early to an exploding 319-plus million at the time of this posting. We have for many years, seen an influx of about ONE MILLION legal immigrants per year, and about ONE MILION illegal immigrants, though many go back and forth from Latin America. Did the United states actually NEED tens of millions of foreign laborers when it had decided to have flat growth, just as the Immigration act of 1965 kicked in?
And how on earth are Americans supposed to compete with the deeply entrenched HB-1 Visa program, which brings in between 60 thousand and one-hundred thousand college degreed and graduate-level professionals from poor countries like India to fill jobs given them PURELY because they will work for 50% to 70% of a degreed American professional, a scientist, a nurse, a doctor, an engineer?
Now, the US government, BOTH PARTIES, have been whole-heartedly behind all this needless immigration, from the exploited poor to the exploited middle class immigrants, simply for the MONEY and backing they get from all the businesses that lobby to keep immigration of all sorts flowing, faster and faster. Easily 75% of the USA’s population growth since the 1980s is from immigrants and their kids, and grandkids. We have all sorts of chain immigration. A person born here to illegal parents, is automatically a citizen, then their parents can become citizens, and bring their extended families.
Now, unless all these people come as independently wealthy, they must work. So where did 20 to 30 million previously American jobs go, with the outright blessing of American business and BOTH parties, and almost every single politician with any power? To the immigrants. And they get exploited (not my point or concern), but it’s the ONLY reason they are invited, or tacitly invited (through the blatant non-enforcement of basicc immigration law and even the most simple border control.
Yes, this country is broke, broken down badly.
And on top of that, as the immense environmental cost of 100 years of heavy industry brought steel, electronics, chemical and other industries to off shore, there went hundreds of thousands of core jobs, the backbone of our economy, immediately followed by millions of other jobs that sold donuts, pants, pencils and doorknobs to all those folks who no longer had money to eat breakfast out, buy new clothes, get more school supplies, or renovate a broken bathroom door…have the authors of this article simply forgotten the absolute obliteration of the American economy and the utter destruction of it’s labor?
Yet that wasn’t enough…as technology began to replace heavy industry (which admittedly HAS to be cleaned up to be sustainable, and at great cost), things like call centers (REMEMBER CALL CENTERS THAT USED TO BE IN THE USA?) became terribly vital. Of course within a decade of this shift in employment, these jobs began to be outsourced, off-shored, by the thousands, then the hundreds of thousands, maybe millions.
Now, about 66% of Americans have no career, and no steady, secure work that even pays their bills and gives them any chance of saving money, even for illness or retirement, much less, a home or a new car.
OK, this article may be about semantics, or the idea that the wealth is just unavailable, but the fact is, and two-thirds of Americans would immediately and heartily agree…AMERICA AND AMERICANS ARE DEAD BROKE, AND THINGS HAVE GOTTEN WORSE IN VERY REAL TERMS (not cooking books and spinning / manipulating abstract economic concepts ) EVERY SINGLE YEAR SINCE ABOUT 2006, ESPECIALLY SINCE 2008.

Underemployed, unemployed, flat -out given up…that’s the overwhelming reality for American labor. Replaced at home, undercut, pushed aside, sold out to overseas dirt cheap labor, and transparently patronized by Democrats and Republicans alike.

At 1/6th my income and 90% less net worth than I had in 2008, I ought to know. At age 50, with a graduate degree, I am worthless in the present economy.
I speak from experience. The reason I’m so broke, is nobody I used to serve, has any money for my expert services. And I can not simply go out and replace my old career with a ready-made corporate job, not even a 2 thousand dollar a month (gross) job. With three decades of great work experience, a Master’s Degree, enough health, and youthful appearance to easily pass for a very fit 40 year old, I am WORTHLESS to corporate America. And so are thirty year-olds, who are still trying to figure out if they will complete their hideously over-priced graduate degrees, or cut their losses now, and defer their loans yet longer, unable to compete with an H1-B visa worker, who is brought here to do the job for FAR less, and is at the mercy of the business that sponsors them.
No, America is not broke.
What planet are the authors of this article from?

Posted by uphill | Report as abusive

The sins, if you will, of the Republican party are many, and serious. Yet the massive partisan finger-pointing among the commenters is disturbing, if typical. You all need to accept that massive corruption and silly, transparent lies not only plague, but absolutely characterize BOTH the democratic and Republican parties. The job of virtually all politicians (JOB ONE, if you will), is ELECTION…JOb two is REELECTION. All is subordinate to that. Politicians are a professional class, and almost all of them seek to stay thusly employed until they retire on our dime with the sweetest benefits.
Both parties are simply in love with mass immigration to replace American workers…Democrats add the “humanitarian” aspect to it all as a sugar-coating, but ignore the massive devastation to all levels of LABOR they pretend to work so, so hard for. And they ignore the inescapable and intense environmental impact of a population that has grown from a zero-growth 200 million in the early 1970s, to the exploding, accelerating 319 million we have at this moment in 2014…with easily 75% of that growth from immigration and their offspring. These things are simply NOT addressed, so intense is their dissonance. They can not be confronted.
And Democrats take the big, big bucks from businesses that take the legals and illegals to work for peanuts, and the H1-B visa workers (about 100,000 a year, who will take a job that an American previously held at 80k or 60k, and work it for 50k or 35 k). Yes, Democrat’s hands are just as dirty as the Republican’s over these issues. The difference is that Neocon Republicans stand for NOTHING but money and power, while the Democratic power elite and the whole party either espouse totally conflicting ideas, and sweep the impossibility of their split agendas under the rug, or else simply LIE and PRETEND to care about poor Latin Americans…whilst gathering all the tax revenues they can to help fund the rest of the money these poor people need to feed themselves after working two or three part time under the table jobs. Democrats help ensure the kids of these poor exploited Latin American workers get not only lunch, but BREAKFAST at public schools, (and many will scoff at this, but I see it in a school in MY neighborhood, and there’s a big sign encouraging people to come on in), these two free meals a day for the immigrant kids extend through the SUMMER. It’s true. That’s a left-leaning program, but big business makes BIG money to come in and shovel out the starch and protein for these poor kids. American taxpayers pay the bill, the Democrats wear their humanity badge proudly, and get campaign support from the big food service companies that cater to schools and prisons, etc. That’s LIES AT WORK, folks, and DEMOCRATS LIE AS MUCH AS REPUBLICANS in the gutting of the US economy. (MAKE NO MISTAKE), I do not support Republicans either. The reason I can confidently say these things, is I don’t seek news that confirms my world view…I seek raw data and facts, then research their sources, before solidifying my political opinions and voting behaviors. Most of you need a dose of reality. It’s much more rigorous a course to take, than hanging out with the same old ideas that make your world view seem good, correct, right, correct. You really have to dump both parties. None of them represent any of us.

Posted by uphill | Report as abusive