A day of financial reckoning will soon come to America, resulting in a substantial redistribution of income and entitlement payouts. It will see its genesis early in 2013, or shortly after this fall’s election.
We’ve already witnessed the opening skirmish of this inevitable transition to a more restricted access to America’s economic pie, beginning with the recommendations of the Congressional appointed Joint Selection Committee on Deficit Reduction, more commonly known as the “Super Committee”. The Committee, however, failed in its mandate to reduce the federal deficit by 1.5 trillion over the next decade, triggering automatic cuts (sequestration) to the tune of 1.2 trillion to be divided between Defense and other programs. Partisan politics had intervened, denting courage, and the chasm between Democrats and Republicans couldn’t be bridged.
The truth is that the economic meltdown we see in Europe is theater for what’s coming here. Thus far we’ve been able to either borrow or print money to shore up our stagnant economy. We’ve even cut taxes.
We’ve become like irresponsible credit card users, postponing tomorrow’s reckoning, to meet insatiable wants. Ultimately, we’ll have to pay our bills or close up shop. Presently, our national deb stands at a staggering $15 trillion and we pay $200 billion interest on that debt annually.
In January, the cuts will go into effect. When you take defense and entitlement programs into consideration, you’ve only got $600 billion left in the kitty to spend elsewhere.
Do we really want to cut our defense budget in an unsafe world or Social Security, Medicare, and Medicaid?
The social and political ramifications promise to be enormous and tax revenues will need to be raised. Ultimately, the poor and low wage earner will be sheltered, and while the rich will see higher taxes, the declining middle class will continue to bear the brunt.
Actually, things have been eroding for several decades. As a serviceman, I was once guaranteed health benefits. Today, a sliding wage scale applies, ruling out the middle class.
Each year, a retiree’s costs for Medicare increases, ultimately compromising monthly Social Security checks.
As for Social Security, after payroll deductions for over forty years, I pay out several hundred dollars in taxes on the rather paltry sum I receive.
And more is coming. Social Security outlays will be reconfigured. Age eligibility for full benefits will advance to 67.
You will pay more for Medicare while getting less coverage.
Let’s take some specific examples of the potential fallout for education, based upon current sequestration projections by the Congressional Budget Office (CPO):
ESEA Title I,Part A):: Funding cut: $17,958,000 affecting 27,660,000 students. Potential job losses: 280,000.
Special Education Grants to States (IDEA-B-611): $14,316,000 affecting 5,900,000 students. Potential layoffs: 230,000.
Head Start (HSA, section 639): $9,841,000 affecting 1,340,000 students. Potential job losses: 440,000.
Even for the financially marginalized, the slice of the pie is getting smaller, particularly at the state level, where budgets have imitated the faulty federal model, forcing cuts in Medicaid and welfare outlays.
At the state level, too, an ominous trend has begun of cities declaring bankruptcy, three in California this year alone. Much of this comes from budgets overburdened with generous retirement obligations to public workers.
The times are a-changing and we may find ourselves entering into an era of social rancor not seen since the Vietnam debacle. The battle will spill over into the streets,
and all, all will be utterly changed. It all comes down to who will pay and how much. (Most people think it’s ok for the neighbor to pay more, but not themselves.)
The great challenge is mustering cuts without dampening the economy. That’s been what’s gone wrong in Europe: austerity without stimulus.
Yet like your credit card balance, the bills will have to be paid.