Defining the American Dream

Can America Afford Democracy?

Posted on Monday, February 14, 2011

While most of us would agree that, almost by definition, democracy as a form of government is very expensive over the long run, I think we are all shocked at how it has so rapidly become unaffordable in recent years. Our cherished system of a government for, by and of the people that has helped to create the greatest, most altruistic and inclusive country in the world is now causing the United States to sink under the weight of its own debt, entitlement programs and annual spending. A system that has through the ages encouraged quid pro quo dealings in the legislative chambers of government at all levels drives the price of legislative progress consistently up.
Yes, there are great government programs that have helped citizens in tough times, in their golden years and in the area of health care, all of which were created with the greatest of intentions only to have become gargantuan and unaffordable by growing well beyond their original scope. The Social Security trust fund will be insolvent by 2037 and the Medicare trust fund will be exhausted by 2017. In 1990, these two expense items represented 28% of federal spending (PDF). By 2019, they will represent 40% of federal spending. Ouch.

Our Founding Fathers wrote a magnificent Constitution that has served us very well over the centuries, but I believe that its one flaw is that there is no provision for term limits in the Senate or the House or, in the absence of these, a check in the system to prevent runaway spending. The Federal Government can create as much money as it would like (e.g. QE2, artificially low interest rates and other money supply increases), and it most certainly has in the last few years. Although previously inconceivable, the United States could face insolvency or become vulnerable to the interests of some not very democratic countries that own our debt. It very well could be that the biggest enemy of the US is not terrorist elements, but rather the amount of debt we have outstanding and who owns it.

I have never met a legislator who isn't in his or her position to improve the lives of others, but there are stark differences in how to achieve this goal. There are those who seek to increase the size and expense of every governmental program who fundamentally do not understand that resources are finite and that the potential to pay for these programs grows only over the course of time through hard work, innovation and investment. Other, more realistic legislators, might seek program growth, but they have a solid understanding that it is vital to be able to afford these programs. I would argue that it is this kind of legislator who is giving humanity a much better level of service in the long run. Absolutely one of the cruelest things that we can do to those in particular need is bankrupt the system.

In the state of Connecticut, we have grown our state budget for nearly 30 years at just under 7% per year. According to our Constitutional Spending Cap (in effect since 1992), we were not meant to increase our spending by more than 2.9% (the higher of CPI or personal income growth) per year during that period. The mathematical disconnect is stunning as much as it is downright scary. We have earned the distinction of being the most indebted people on a per capita basis in the United States. We are pushing the limits of our borrowing capacity, used up our entire Budget Reserve Fund, raised taxes as high as the population will bear and are still looking at a near 20% operating budget deficit for the next 3 years. Add to that somewhere between $50 and $80 billion in unfunded pension and other than pension liabilities. California faces the largest budget deficit in the country at over $25 billion, yet the legislature has been approaching the crisis with a business as usual attitude. With very similar fiscal problems, Michigan and Illinois are following suit. On the other hand, in New Jersey, there is strong leadership coming from the governor who will help save the livelihood of hundreds of thousands of people by living within the state's means and not bankrupting their unemployment fund, pension fund and other funds. Even in New York State, Governor Cuomo is proposing dramatic cutbacks across the board to remain solvent and give the maximum number of people a chance to keep their jobs and look forward to a bright future.

On behalf of the country or of an individual state, we have to ask the question of where we go from here if we are to salvage our strengths and previous economic well being. A very strong case can be made that if we were to restore spending to 2007 levels and adopt a pro-growth strategy with the reasonable existing tax rate structure in place, we could grow ourselves out of the danger zone within 7 to 10 years. Here in Connecticut, that is certainly what we will be trying to do as members of an outgunned minority, and the reason is that we care deeply about others, especially those in need, as well as future generations.

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