The midterm elections are over, and the people have spoken. Now we are onto the hard, messy, and sometime maddening business of forming new political alliances, rolling up our sleeves, and diving into the many pressing problems our new legislators were elected to solve.
Of course, the 900-pound gorilla in the room is easy to identify—we are out of money. Our local governments, our states, and the federal government may have all reached the functional limit of their ability to borrow against expected future revenues to pay today’s expenses. We’re not quite at the end of our fiscal tether, but we are much too close for anyone’s comfort, and we perhaps see visions of our own draconian fiscal future when we look across the pond at the difficult choices now being made by the United Kingdom and so many nations in the European Union.
What are we to do? It seems obvious that we need to very significantly cut spending and consider raising some taxes and fees as a first step to climbing out of the hole we’ve spent so many decades digging, but the political questions of whose spending is cut and whose taxes are raised too often gets caught up in the partisan media echo chamber and is distorted into choices that range from killing grandma today to selling our children into slavery tomorrow.
Perhaps we simply need to turn down the volume and work toward establishing broad guidelines for the most basic needs we expect our government to fulfill. Hopefully, we can all agree the following list, offered in no particular order, may be a good start for our discussion: Public Safety, Education, Infrastructure Rehabilitation, National Defense, Medicaid and Medicare, and Public Pensions and Social Security. However, even these items are beyond our present ability to tax—or borrow—and spend, and each will both strain our coffers and the forbearance of our citizens when it comes to additional taxes, fee increases, and the cuts in benefits and services necessary to make the numbers add up. Nothing should be so sacrosanct as to be beyond discussion, and a little imaginative “out of the box” thinking would be more than helpful—as long as it does not involve some more of the financial sleight of hand that got us into this mess in the first place.
With this in mind, we need to start budgeting the way we all do in our own households: First ask ourselves if any proposed spending is a “need” or a “want”. We may want to keep funding purchases of new public lands, buy a piece of public sculpture, or put a new marina on a lake. Any of these—or ten thousand other ideas—may create a few jobs, provide an opportunity for a photo op, or put a smile on the faces of the local politicos the week before Election Day. However, it does not mean we should do them. Given our grim situation, we need to adjust to the idea that Santa Claus does not—and should not—visit every single day of the year. We are well past the point when we can any longer afford to spend money we don’t have on things we don’t need.
Moreover, when it comes to establishing our list of needs, please note that I left off one item that is near and dear to most our politicians and many of our voters: economic development. This is not because I do not believe in economic development; we certainly need jobs. However, given that government-sponsored economic development typically boils down to passing out taxpayer money in the forms of tax breaks, loan guarantees, or simply shouldering many of the costs of development, it seems an exceedingly poor idea to continue down this path during an era of record deficits in every nook and cranny of our governmental structure. If a project—whether it is a sports stadium, convention center, or retail complex—makes economic sense, a private developer will surely step in to assume both the risk and reward. If we have to remove all the risk to encourage a private developer to get on board, perhaps we should carefully consider the inherent logic of asking taxpayers to assume responsibility for the downside potential while allowing the rewards to go elsewhere. Capitalism is a wonderful system; we should let it do what it is designed to do—make the difficult and dispassionate calculations of risk and return—and get out of the way.
And so we get back to that pesky question of discerning the difference between needs and wants. It will be a long and difficult process, and our nation’s founders intended it to be just that. If we can develop a dialogue that does not descend into name-calling and sloganeering, we have a fighting chance of succeeding at creating the necessary consensus for change. Failing this, we can only look forward to more gridlock, more hand wringing over broken government, and more troubles down the road. The path to fiscal and economic recovery will be a hard slog that is ours—and ours alone. We may “want” a magical happy ending that is all smiles and sunshine, but we “need” a hard dose of common sense and a keen sense of reality to get us back on course.