The debt-ceiling drama in the United States is over, for better or for worse.
My money is on worse.
The U.S. federal government has borrowed to pay its bills for 59 of the last 71 years. It hasn’t posted a budget surplus since 2000. Tuesday’s last minute deal will not change this trend.
At some point the chronic deficit chicken has to come home to roost.
In the real world, you cannot continuously spend more than you make.
In the real world, when you borrow money from one group of people to pay off another it is called a Ponzi scheme.
In the real world, eventually you have to pay off your debts – even if you are the U.S. federal government.
And when you are forced to deal with chronic deficits in the face of a continuing economic recession that has left almost 15 million Americans unemployed, your options are, to put it mildly, limited.
Moral outrage over government cutting and spending runs high. Politicians are dammed if they do, and dammed if they don’t. Armchair quarterbacks are a dime a dozen. Me included.
So I decided to put my skills to the test by playing America Public Radio’s online game Budget Hero (see http://marketplace.publicradio.org/features/budget_hero/). I encourage you to play too.
Your mission, if you so choose it, is to play at being a member of Congress or the president. You choose what taxes to raise and what programs to cut. You will suffer the consequences. (Well, lucky for you, not really.)
First step: choose your “values”. Do you favour “efficient government” and cutting spending? Or “competitive advantage” and more funding for science and technology, education and innovation? Or maybe you lean towards policies that support energy independence or the environment.
Next, you chose policies. Tax. Spend. Cut. The game provides instant feedback on how policy choices affect deficits and accumulated debt going forward and whether these choices conform to your professed values.
U.S. budget expenditures fall into nine categories: defense and diplomacy; schools and kids; science and nature; housing and living; infrastructure; health care; social security; interest on debt; and miscellaneous.
At US$1.5 trillion a year (all amounts are in US dollars), the biggest expenditure is health care. Among other things, this line item includes Medicare for seniors and Medicade for individuals with low incomes. Policy choices include: increasing drug costs for wealthy seniors; raising Medicare eligibility from age 65 to age 67; and either adding a public health insurance plan to “Obamacare” or scrapping Obamacare in favour of Republican and Tea Party-favourite Paul Ryan’s health care plan.
At $1.3 trillion, the second biggest line item is Social Security. Two options here: raise the age at which Americans are eligible for social security from 66 (soon to be 67) to 70; and/or slow the increase in Social Security benefits by tying them to consumer prices instead of wages.
Third is spending on defense and diplomacy at just over $1.1 trillion. The U.S. spends more on its military than any other country in the world – more than the next 15 countries combined. Options here include cutting (or increasing) military spending, foreign aid for AIDS programs, cleaning up defense nuclear waste dumps, and funding for homeland security.
Fourth, at $800 billion, is interest paid on debt. No choices here. In theory, the U.S. government would never choose to default on its debt. If they did, the global economy would be in deep doo-doo. Enough said.
The rest of the expense categories are: housing and living subsidies for low income Americans and local economic development subsidies ($360 billion); infrastructure including roads, rail and waterworks ($284 billion); miscellaneous expenditures including oversight and regulation of markets and consumer products, enforcement of immigration policies and funding for the arts and humanities ($154 billion); schools and kids ($121 billion); and science and nature including scientific research, oversight of the environment and national parks, and agricultural production ($104 billion).
Lastly, there is the option to raise or lower taxes. For example: increase the gas tax; phase out homeowners’ mortgage interest deductions; and/or end (or increase) tax breaks for extractive industries.
The U.S. debt to GDP ratio is 62 percent. My goal was to reduce it by half – bringing it in line with Canada’s.
A few tentative cuts got me nowhere, so I threw my values out the window and started slashing and burning. To no avail. After cutting troop numbers in Iraq and Afghanistan and freezing further military spending, cutting discretionary spending by 10 percent across the board, eliminating federal education funding, indexing the minimum income tax to inflation, increasing taxes on extractive industries, and eliminating the Department of Energy, I could only reduce the U.S. debt to GDP ratio to about 40 percent over the next ten years.
Thank goodness for my armchair quarterback status because, if I were an elected official, my guess is I wouldn’t be getting re-elected any time soon. Playing Budget Hero teaches you that the choices for U.S. politicians aren’t theoretical. Change will require politicians with nerves of steel and a motivated electorate with the discipline to stay the course over the long run. Good luck with that.
