We in America didn't prepare for a rainy day - and that drizzle was long ago replaced by a series of hurricanes. We are still only in the eye of the storm - a series of storms, really, each worse than the last. And we are sinking.
The Stanton Peele Addiction Website, December 10, 2010. This blog post also appeared on Stanton's Addiction in Society blog at PsychologyToday.com.
America Is Already Gone
Reader's alert: This post contains some numbers - these are not crucial to understanding this post. You can ignore them. And, oh, the content is highly alarming.
A funny thing happened in the last month in 2010. The President's highly publicized bipartisan debt commission released its report on December 1. It recommended cuts and taxes that (it claimed) would reduce the nation's debt by four trillion dollars. This, if realizable, would have only been a start on what we are confronting.
Sidebar: The national debt is now about $13 trillion. The debt is the accumulated deficits from year to year. Deficits are the disparity between how much the government takes in and how much it spends. The deficit in 2009 was about $1.5 trillion. It will not be less in 2010.
But the commission couldn't generate enough support -- starting with its own membership(!) -- to submit the report to Congress to be voted on. In fact, both parties broadly assailed its specific recommendations -- the Republicans attacked the taxes it recommended as a burden on Americans; Democrats attacked recommended cuts for programs that benefitted Americans.
Then another funny thing happened. The Republicans demanded -- and the President agreed to -- extended reductions in tax rates, including those for wealthy Americans, that were cut for a prescribed period without being accounted for by George W. Bush. No source is provided to fund the extension of these reduced rates, adding $1 trillion to the debt. Rank-and-file Democrats opposed the continued cuts for those well-off.
Democrats, for their part, pushed for extending unemployment benefits since unemployment rates remain high. They also backed a bill providing help for tens of thousands of emergency workers and volunteers who became ill from the ground zero cleanup after 9/11. No source for funding these benefits was provided. Republicans opposed both these bills.
The Republicans support unfunded reduced taxes because we are in an urgent economic emergency. The Democrats requested unfunded extended benefits because we are in an urgent economic emergency.
Have you noticed a lot of emergencies lately? Of course, we were attacked on 9/11 -- if that wasn't an emergency, nothing is. This led us into two wars -- in Afghanistan and Iraq -- which are now approaching their second decades. Wars are, by definition, emergencies. Then there were the fiscal crises -- Wall Street, housing, automakers -- that bridged between the Bush and Obama administrations. Crises = emergencies.
Do you know that old bromide, about saving for a rainy day? America was once wealthy. But we didn't provide for these emergencies, for which we went into the hole. Aside from the acute emergencies -- the wars, the economic crises -- we have underlying emergencies that we failed to address when we were flush. Here are a few:
Infrastructure emergency: Infrastructure is roads, bridges, public transportation, railroads, airports, schools. The American Society of Civil Engineers (ASCE) says there is a $2-3 trillion infrastructure backlog. One of every eight bridges is "structurally deficient," and 85 percent of public transit systems are struggling. As ASCE President Blaine Leonard put it, "We are still driving on Eisenhower's roads and sending our kids to Roosevelt's schools."
A personal note: When I and other Americans return from overseas, we are struck by how decrepit and outdated our airports are compared to luxurious ones we encounter throughout Europe and Asia -- it is hard to avoid thinking that we are already a second-class country.
Are you ready for the two greatest economic crises of all the ones so far reviewed? Ones that no one is smart enough to deal with?
Health care emergency: These quotes are from medical school comencement speeches delivered by Atul Gawande the last two years at The University of Chicago and Stanford and published in The New Yorker.
"Our country's health care is by far the most expensive in the world. It now consumes more than one of every six dollars we earn. The financial burden has damaged the global competitiveness of American businesses and bankrupted millions of families, even those with insurance. It's also devouring our government at every level -- squeezing out investments in education, our infrastructure, energy development, our future. . . .
By the end of the decade, at the present rate of cost growth, the price of a family insurance plan will rise to $27,000. Health care will go from 10 percent to 17 percent of labor costs for business, and workers' wages will have to fall. State budgets will have to double to maintain current health programs. And then there is the frightening federal debt we will face. By 2025, we will owe more money than our economy produces. One side says war spending is the problem, the other says it's the economic bailout plan. But take both away and you've made almost no difference. Our deficit problem -- far and away -- is the soaring and seemingly unstoppable cost of health care. . . .
But the public doesn't know what to do about it. The government doesn't know. The insurance companies don't know..."
Okay, just one more crisis that Gawande adumbrates.
Yours state's emergency (this means you): American states have been having greater and greater deficits each year - according to a just-released state budget report,
"State lawmakers closed a cumulative budget gap of $84 billion while crafting their FY 2011 budgets. For most states, this marked the third or fourth consecutive year of budget gaps. Now, midway through FY 2011, new gaps have opened in at least 15 states. The outlook for FY 2012 and FY 2013 reveals additional state budget gaps."
When the report says that states closed budget gaps, this means they cut services, and passed costs along to municipalities, requiring further cuts in police, health care, infrastructure, education (maybe you've noticed these where you live - they're going to get worse - much worse).
But these deficits are worsening despite severe cutbacks, for two reasons - first, the withdrawal of stimulus funds (you know, the ones the federal government went into debt on your behalf to provide):
"States will have $38 billion less in federal stimulus funds in FY 2012 than they had in FY 2011. . . . This will create big holes in state budgets. . . . The stimulus funds have helped support state budgets since FY 2009, so their dramatic decline - they will be essentially gone by FY 2012 - will pose additional budget challenges for state officials."
But withdrawal of stimulus funds is not the biggest crisis that states face. That's unfunded pensions and health care benefits owed to retired workers - which number in many tens of billions of dollars for America's major states (e.g., Illinois, New York, New Jersey, California) which are currently struggling to stay afloat. Here's how this emergency was described in the WSJ :
"Pension plans for state government employees today report they are underfunded by $450 billion, according to a recent report from the Pew Charitable Trusts. But this vastly underestimates the true shortfall, because public pension accounting wrongly assumes that plans can earn high investment returns without risk. My research indicates that overall underfunding tops $3 trillion.
The problem is fundamental: According to accounting rules adopted by the states, a public sector pension plan may call itself 'fully funded' even if there is a better-than-even chance it will be unable to meet its obligations. When that happens, the taxpayer is on the hook. Yet public pension plans ignore market risk even as they shift into risky foreign investments, hedge funds and private equity."
Note in this description that you will have to make up the shortfall - that's property and other taxes, along with greatly depreciated services. Kiss your lifestyle goodbye. Your kids? Forget it - they won't be living in a developing nation, but they won't be living your lifestyle, even the reduced one you may currently have.*
Oh, we're already gone in America.
* At least one reader calls me an alarmist Tea Partyer, so I referred additionally to this December (Ho! Ho! Ho!) Times article, "Mounting Debts by States Stoke Fears of Crisis," to provide immediacy:
The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.
While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.
Related News Analysis: Arizona Medicaid Cuts Seen as a Sign of the Times
Picture: Yuki Scott, right, watched her daughter and other children one Friday last May in Hawaii, because the school year was shortened by 17 days.