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

 

25 comments

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We need to repair and upgrade our infrastructure to make us more competitive

Posted by Leftcoastrocky | Report as abusive

Great op-ed. This needs to be said again and again so that Americans absorb this critical piece of information. One of America’s biggest problems is misinformation. Americans just don’t get the facts. We can’t make good, informed decisions regarding government and its policies because we don’t have the correct information. Information is being controlled to control the people for the benefit of the few.

America is not broke. We need to close tax loopholes that favor people and industries that don’t need the tax breaks and ask the wealthiest Americans to pay a little more. Americans need to be made to understand that our country did much, much better in the past when taxes were higher on the wealthiest Americans. We need to ask ourselves what is more important, our country or enabling a few to build huge stockpiles of wealth? The money’s here, it’s just being channeled to a relatively few people.

Posted by carnivalchaos | Report as abusive

The premise of this piece – that America is not broke because the national debt is actually projected to shrink “as a share of the economy” is eroneous because it’s not “the economy” that’s on the hook for the debt. It’s the American people. And by that measure the national debt has been soaring exponentially.

Not that the Republican approach is the right one. It’s impossible to balance the federal budget without first restoring a balance of trade. Federal deficit spending is the only mechanism available for plowing back into the economy the money that is drained away by the trade deficit. It’s no mere coincidence that the growth in the national debt since 1975, the year of our last trade surplus, almost exactly matches the cumulative trade deficit over that same period.

Pete Murphy
Author, “Five Short Blasts”

Posted by Pete_Murphy | Report as abusive

As long as we can continue to print money and have others accept it, we are not “broke”. If the dollar ever stopped being the Reserve currency, we would quickly find out just how “broke” we are.

Posted by canrancher | Report as abusive

The problem is not the national debt at current interest rates but the national debt at historically more typical interest rates. Servicing the debt at, say 4.5% – not at all uncommon during the past 50 years – would mean debt service would exceed the defense budget.

Interest rates are artificially low because of unprecedented action by central banks and because investment money doesn’t have a place to go that earns a higher yield with similar perception of safety. This will change.

Posted by WindrivenJT | Report as abusive

We can either amend the social contract or watch it shatter into a thousand pieces when we can no longer foot the bills.

This is an asinine editorial. But it doesn’t really matter because the country’s on a bee-line towards insolvency. I look forward to the liberals of 2050 blaming our cratering fiscal and economic situation on “hoarding” and “price-gouging” as redistributionists always do when they run out of other peoples money. Same as it ever was.

Posted by EndlessIke | Report as abusive

The next time I get a credit card bill, I am going to send a copy of this article and tell them even though I do not have the money to pay the bill, I am not broke, and ask them to not to worry, “everything is beautiful in its own way.”

Posted by scatterwisdom | Report as abusive

The war on terror was also one of the fear mechanisms by which the americans were supposed accept the decay of freedoms and rights and accept less of the fruits of their labor. The job creators were to save us, but they never will because they are sociopaths. It’s all in Orwell’s novel. He knew the facist well and accurately described the technics they use for manipulation. It’s mostly the GOP, but we know Kerry and the Clintons are amongst the lapdogs in politics who pander to the world economic elite (bankers, and owners of the federal reserve), who are primarily decendents in facist ideology. The DFLers (rank and file) knew it and that is why the Hillary didn’t get the nomination last time. So, good article but it only focuses on the economic fears that are artificially created by the GOP and others. Learn to work for yourselves america, and not the facist organizations. Yes, it is difficult since they have infiltrated so much of the economy. However, the big three profit centers are oil, guns, and drugs. So, america, stop buying those. By the way, look up the opium wars, if you want to see the prototype method of profits perfected by the british empire and now employed in the US, although we have encorporated encarceration as a profit center now too.

Posted by brotherkenny4 | Report as abusive

Not broke? Then please pay your share of the tab and not insist the other better off guy over there should pay a larger share of the tab while you keep adding to it.

Posted by ajsfca | Report as abusive

What we are seeing with these GOP cries of ‘we are broke’ is the end game of the whole ‘Starve the Beast’ strategy.

the thinking is this…

1. ‘conservatives’ for years have wanted to do away with social programs.

2. Since they are so popular, because they work!, the only way to get rid of them is to say ‘can not afford it’

3. Before the Reagan years deficits/debt were inconsequential.

4. Reagan started ‘starve the beast’ by cutting taxes and increasing deficit spending.

5. Clinton got it under control and showed that yes indeed we can ‘afford it’ with a sensible revenue/spending model.

6. The conservatives elected Bush 2, who then did Reagan policies on Steroids, HUGE bush tax cuts and 2 unfunded wars, thus blowing up the defecit/debt.

7. Conservatives are not dumb, they see the demographics changing, so now is the time to try and act out the end game of ‘Starve the Beast’, cause is probably going to be their last chance.

8. to summarize, they, ‘conservatives’ destroy fiscal responsibility in order to claim we are ‘broke’ to trigger cuts in those Social programs they hate so much.

Posted by USAPragmatist2 | Report as abusive

Republicans won’t compromise because they believe America belongs to them and them alone, and because their pride is more important to them than the well-being of the country.

Posted by delta5297 | Report as abusive

We have a revenue problem, not a debt problem!

During the Eisenhower administration, those making over $400,000 paid a marginal tax rate of over 90%. As a child I remember this time as a great time, and the economy was booming.

Since then we have had many tax reductions, now down to less than 40%, all in the name of job creation. You would think by now we would have 0% unemployment.

The fact is business and the wealthy do not create jobs, they create products, services, and wealth. In fact they work to not create jobs through modernization.

What we have done is to devalue our tax base that has lessened investment in infrastructure, education and job training, and quality of life.

We, particularly the wealthy and business have lost their allegiance to America. Most probably due to globalization. You can name any region of the world as your financial center as Caterpillar has done.

Americans have also lost their values as to the purpose of a democratic structure that supports capitalism that provides revenues for creating a better civilization.

Americans spend too much on our military.

Europeans spend little on military, and depend more on regional associations. They then have more to spend on infrastructure, education and job training, and quality of life for a better civilization.

Until some of us Americans understand that the wealth we create in our nation must go back to government to create a better civilization we are planting the seed of unrest.

Posted by Flash1022 | Report as abusive

The USA May not be broke but unless things change going broke is possible. The government is spending more than it takes in. It is not possible to tax the 1% enough to cover the deficit, even to try and close the gap through tax increase would at some point cause investors to move countries, just ask the French what happens at a 75% tax rate. Government spending, unless it is on infrastructure that’s returns more than invested, is a drain on the economy, welfare spending is a drain. Here’s why, to provide welfare, the government must take the money from somewhere else in the economy via tax or borrowing, the when the money paid in welfare is spent by the recipient, it goes bak into the economy. Borrowed money will expand the economy today but at a future cost. Tax income to government does not expand the economy as it was taken from within the economy to begin with, tax money just changes pockets. Over taxing an economy will reduce long term investment which will eventually negatively impacts, especially when there is a heavy debt burden.

The main culprit in the US is the Fed, more power full than the president, and determined to create inflation, if inflation grows faster than income, you have a problem and that is what has happened for three decades, inflation has not out stripped wages constantly over this time but it has enough to cause the middle income earners to be squeezed. Recently the Fed has exacerbated this with Zero interest rates allowing those who can borrow to do so at record low prices for money, the problem with this strategy will occur when the cheap money eventually finds it’s way into the economy, how long that takes a lot of economists would like to know, to date all the cheap money has yet to do what was envisaged. But when this cheap money gets into the economy pushing up inflation the Fed will be forced to increase interest rates, and that will slow economic growth, from there who knows what will happen. If you believe the Fed then it’s all fine. But remember the Fed has an abysmal record in forecasting the long term direction of the economy and is even worse at predicting bubbles even as the pop around them.

Posted by Robo48 | Report as abusive

This article does a disservice. The U.S. federal budget deficit has indeed dropped as a percentage of the output during the last couple of years. However, it is still running at historically high levels, and is projected to rise again in relative terms within a few years. Under President Obama the debt has risen by an astounding net of over $7 trillion. The national government has many $tens of trillions in unfunded Medicare, Medicaid, Social Security, Obamacare, and federal government worker retirement unfunded liabilities. By forcing Obamacare into existence, the Democrats have aggravated the federal government’s long-term financial position further. To imply that with just a few minor-sounding compromises, these liabilities are going to go away, or, like this article, to not directly talk about them at all, is at best ingenuous. This type of shallow discussion gives politicians the political cover they seek to keep doing more damage to our federal government’s fiscal accounts position, by giving them the idea that they can spend much more. The author is being highly irresponsible. The federal government needs a long period of fiscal consolidation, retrenchment, and cutting back.

Posted by ExDemocrat | Report as abusive

When every single dollar that is created by our privately-owned Federal Reserve System is spawned into existence by an offsetting DEBT, at interest…then yes, we are broke. When the interest rates, quantity, and value of said currency is controlled by a handful of non-government regulated private bankers…then yes, we are broke. As Mr. Rothschild once said: “Give me control of a nations money supply, and I care not who makes it’s laws.”

“You’ve been living in a dreamworld, Neo.”

Posted by CF137 | Report as abusive

The good people of the USA are being sold a bill of goods by these “conservative” starve-the-beast liars. All the crying about unfunded this and that ignores the entire point here. Solve the exploding healthcare costs of the country, and the problem simply solves itself. The government provides most of the drugs research as it is anyway through public funded universities and the NIH. Drug companies need to be controlled, as do insurers, HMOs, and other for-profit monopolizers. Solve that and you solve the whole shebang.

Everything else requires only mild tinkering.

Lastly, to the idiots that claim that taxing the rich will never solve our deficit/debt problems, you are either lying or ignorant. You don’t pay down interest bearing debt with higher taxes, you invest in the economy via infrastructure, competitive advantages and specialized job training for the future. As always, we grow our way out of debt, or we collapse entirely. What on earth makes any of you irresponsible people think we can solve our problem of indebtedness by shifting the costs of society onto a bunch of seniors/poor people who don’t have the money? How will that pay our bills in the future? We simply don’t have enough government to cut to make this plan work… and all this in the richest society in history! If we are broke, every other civilization must have been what…? Confused as to their wealth? wake up people!

Posted by Benny27 | Report as abusive

Go IOUSA!!!

Posted by minipaws | Report as abusive

Paul Ryan and his buddies can go starve instead of getting paid by US Taxpayers money to crap on hard working under paid Americans.The only reason we have people needing food and health assistance is because of greedy people like Paul Ryan and the Koch Brothers paying lobbyists and news organizations to spread their lies and bad information while keeping wages low.They wish to have US wages as low or lower than China so they can have more luxury homes and stack up paper in banks or bars of gold at home to look at while people around them starve.They know nothing about fair living wages since they have always got more than that all their lives.People trashing the working class need no place in America and should go live in Russia with Putin and his Mobster oligarch’s because they act just like them.Real religious people DO NOT STARVE their neighbors. These so called conservatives are beggars at the feet of the richest in USA that think they are so intelligent,they don’t raise wages for many that could use extra money buying more products and having less people on Govt assistance.
They know for most part they can not strip food and medical assistance but it is good talking points to people that are not really religious but are greedy self serving closet bigots.They are playing to the far right and brain dead zombie followers that watch Faux News and believe every word.
Help thy neighbor and you help yourself and community.Don’t sink to the level of these Snake politicians that don’t know that cutting taxes for the richest is the largest mistake that has driven up US deficit.There has never been an never will be Trickle down Economics.You don’t see the Billionaire Koch brothers lobbying for higher wages for those under them,just the opposite. The people at the top for most part think of what they need most every day,not what those around them need.Catholic’s are a community of givers,not takers like the Billionaire CEO’s of many US companies.

Posted by Realinfo4u | Report as abusive

what an irresponsible article. This country owes 17 trillion dollars. The taxes each year account for about 3 trillion dollars. This is like someone making 100k a year and having a mortgage of 600k. Unsustainable. And we keep adding about a half trillion a year. If this is not broke I am scared to ask what is!!

Posted by costag1 | Report as abusive

the debt of the united states is wayyy too high… I don’t understand how that can be denied. But, I do agree with the author that extreme political groups are aiming to destroy Social Security and Medicare (which is not the solution). I am sure those individuals claiming that Social Security “should be eliminated”, have too much money for their retirement…. or maybe they are not thinking about their future. I want to see those people when they are 75 years old when they have a heart attack after receiving a medical bill worth thousands of dollars for a previous false alarm heart attack and a 1 hour visit to the hospital. Basically every country in the world has a safety net of some kind for the elderly. It’s ridiculous that one of the best countries is wanting to go backwards in this matter.

Posted by CommanderOtto | Report as abusive

Here is a dumb idea:
We make it mandatory that ALL GOV programs stop filling vacant job positions.
Effective Immediately.
Instead…
Fill that position with an “inspector/ Investigator” of sorts.
Pay them a bonus to root out the bad.
I’m guessing it won’t take more than 10% of the total headcount in each department/ agency/ activity to find the waste.
The problem would fix itself.

It’s the abuse of these social programs that pisses me off.
Not the programs themselves.

Posted by UkilledKenny | Report as abusive

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