Bubble, bubble, toil and trouble
The Occupy Wall Street protests make for great theater but in the end could turn out to be a distraction from the next big bubble, the public debt. Most of the news about our collective red ink has been taken up with chatter about just the national debt.
But while our national bill stands at 14.8 trillion with a federal budget deficit of 1.3 trillion dollars, the Feds still have other means of dealing with the financial crisis besides going directly to the populace and raising taxes.
The U.S. government can cut back on what they’re giving to individual states and that’s exactly what they’ve been doing for the past four years.
The 50 states, though, which collectively have built a debt of $1.2 trillion, according to the U.S. Debt Clock, www.USDebtClock.org, can also afford to pass on some of the pain by withholding money from individual localities and demanding more money for the services they’re still providing.
The end of the chain are the local governments, which are staring down 1.7 trillion dollars in debt and are left with cutting services or taxing a populace that has less and less money to spare. Most have had to cut back on funding for police, fire and education and eliminate all together necessary social programs.
However, much of the state and local governments annual debt isn’t as a result of current services but comes from the rising cost of public pensions. Many of the largest cities and states have seen the cost of keeping up with public pensions double in recent years to almost 20 percent of the budget.
Economists are predicting that unless more revenue comes in it’s possible that at some point the private sector will be working to pay for the public retirement.
The Gross National Product, our leading indicator of revenue, ended the second quarter with an increase of 1.3 percent, according to the U.S. Department of Commerce, which is about a third of what it would need to be to magically correct the problem. That doesn’t appear to be a possible solution to the looming crisis.
The recent drops in revenues as a result of the Great Recession, along with years of failing to fund pensions followed by placing what money there was in riskier investments in the hopes of making up the shortfall have made the problem reach a catastrophic level.
The truth is, we allowed our federal, state and local governments to spend more than they really had for years with no accountability while building no financial reserve. At the same time, promises were made to public employees about their retirement.
But unless something as big as the advent of the Internet shows up in the next couple of years we will not be able to keep those fiscal promises and millions of older public servants will find themselves looking for a job to make ends meet.
When the Great Recession first started in January of 2008 we all shook our fists at Wall Street and said a collective, how dare you, at the audacity they displayed. Worthless, inflated mortgages were bought and sold, over and over again until all of us were somehow mixed up in this mess.
Our outrage grew when corporations too big to fail were given bailouts to fix their messes.
Nearly four years later and we’re back to shaking our fists at Wall Street in large protests that are catching on because the same traders are still flying high and taking home large sums while the other 99 percent are struggling to make ends meet.
We got tired of waiting for governments to do something that directly benefits us and we’ve taken to the streets to stop the madness. However, back when the government kept offering more services for less money with no new taxes we stayed at home and said nothing.
It’s still possible that in the end we will figure out a way to regulate our financial markets more responsibly and put more money into the hands of our government.
But will we have enough integrity to use that money for our current debt and forgo any new services till all of the budgets are balanced? So far, no one’s mentioned that on the frontlines of the Occupation. Tweet me @martharandolph and tell me what you think of our government debt. www.MarthaCarr.com. Email Martha at Martha@caglecartoons.com.
©2011 Martha Randolph Carr; distributed exclusively by Cagle Cartoons, Inc.