INCLINE VILLAGE, Nev. - What is this fiscal cliff that the media have been dramatizing and the politicians have been wringing their hands about?
Ben Bernanke, chairman of the U.S. Federal Reserve, stated before the House Financial Services Committee that "a massive fiscal cliff of large spending cuts and tax increases" would take place on January 1, 2013. Mr. Bernanke was referring to the mandatory tax increases and spending cuts amounting to $1.2 trillion over a period of ten years that would take effect on that date should the bipartisan super committee appointed by congress fail to arrive at a mutually agreeable deficit reduction plan.
And so it was: The committee failed to agree because the middle class would not accept less and the rich would not pay more. So panic struck as the 11th hour approached. But then President Obama and the Republican leadership produced a watered down package, on January 1, 2013, that delayed facing up to their $17 trillion fiscal cliff to another day.
But these euphemistic tactics will not assuage the problem. Instead, they will aggravate it at the rate of $140 million per hour in interest and with the additional borrowing we are incurring. Meanwhile 40 cents of every dollar we spend is borrowed from China, the Arabs and elsewhere, with blind eyes it seems to when and how we will pay this $17 trillion debt.
Not too long ago France invaded Mexico and confiscated part of that country's territory as payment of what Mexico owed it. So should we give China, for instance, some of our territorial holdings in the Pacific as payment for what we owe them? (Russia sold Alaska to the United States).
Should we devalue our currency, thus reducing the value of what we owe, say from $17 trillion to $5 trillion? Better yet, as the modus operandi has been through history, should we start a war, vanquish our creditors and declare the debt null and void? Of course not, for this is not the American way.
Thus, one can see that there is no alternative but to produce balanced annual budgets that include say $500 billion towards paying the debt. This would take at least 40 years to accomplish and would lead to a prolonged recession unless the people set partisanship aside and work together to improve productivity and share in carrying the burden.
In this regard, it should be pointed out that there is a great deal of abuse and waste in our federal budget, enough of it to more than pay for our national debt: Foolish and expensive wars and a defense budget that exceeds the combined defense budgets of thirteen major economies in the world with no enemy in sight.
Unjustified tax breaks that lobbyists got Congress to approve for their rich and powerful clients. Welfare payments large enough to nullify the incentive to work. Unemployment payments for seasonal workers, such as loggers, miners, resort employees and others who earn the equivalent of a years pay by working overtime during the season, then collect unemployment checks for the rest of the year.
To paraphrase the Nobel prize laureate, economist Milton Friedman: The party is over. It is time to tighten the belt and live within our means. Otherwise, the young welfare recipient - who did not accept less - chatting on his $400-$600 iPhone, while standing in line to pay his grocery bill with food stamps will be standing eventually in a long, long soup kitchen line without his iPhone.
And the industrialist who did not want to pay more to ameliorate the burden of the middle class will find himself without a middle class to buy his wares. And he too might be standing in that long, long soup kitchen line.
- Sid Bekowich is an Incline Village resident.