Commentary
Last week, the American public received a bit of a shock if they weren’t paying attention. The consumer price index (CPI) clocked in at 3.1 percent. Sure, technically, the inflation rate is down from the high, but it’s still very high.
Curing inflation isn’t hard, but it does take political will, discipline, and thinking outside of the box.
Since COVID-19, the U.S. government has been on a spending spree to make anyone forget any other spending spree. The year 2023 saw the debt-to-GDP ratio hit 133 percent.
It’s not tax cuts that are the problem. It’s government spending that is the problem. Economist Mark J. Perry posted on social media some data on Feb. 13 about who pays taxes. In 2021, the top 1 percent of taxpayers (1.53 million of them) paid a record-high 45.8 percent of all federal income taxes.
Meanwhile, a record low of 34.4 percent was paid by the bottom 95 percent (146 million). More than 50 percent of all Americans pay no income tax at all. The rich are paying more than their fair share when it comes to U.S. taxes. It’s unsustainable, and instead of arguing over extending tax cuts or carving out more special deals, we would be better off revamping the entire way the country collects taxes.
Meanwhile, this year we will pay more in interest on the federal debt than we spend on defense. In case you are wondering, that’s $870 billion on interest and $766 billion on defense. Clearly, it is unsustainable.
What’s the answer?
Telling the government to stop spending is merely one answer. The answer is far too broad as well. Stop spending on what? Every dollar that is spent has a lobbying group behind it. American citizens and the federal budget have become hostage to what James Madison wrote about in Federalist #10: factions.
Deregulation is one great answer. Deregulation will increase competition. Why do we only have two to three major health insurance carriers? How come there are only a few big banks? It’s not because we haven’t enforced antitrust laws. It’s because we have regulated to make it hard for new businesses to start and compete.
The federal deficit and spending spree our country is on is unsustainable.
What’s unsustainable in the federal budget? Mandatory social spending consumes more than 70 percent of the federal budget. As soon as any elected official gets to Washington, they don’t have a voice over how this money is spent. We must get serious and reform programs such as Medicare, Social Security, federal retirement programs, veterans’ programs, and income security programs. These all need to be revamped.
Meanwhile, we are on our way to unintended universal basic income in this—but that’s just not how our system is set up.
These aren’t easy decisions, and they are demagogued to the hilt. There are ways to do it.
For example, Social Security and federal retirement programs could be privatized in some ways. For people under the age of 40, you could offer up a discounted cash-flow lump sum that would go into a private retirement account managed by the individual. You could also do similar with federal defined-benefit pensions.
The government could even offer buyouts to people who are old. Let them choose if they want to take it or not. Privately managed accounts earn significantly more and grow faster than Social Security. It’s not just set up poorly, but it’s managed poorly.
A lot of candidates want to talk about things such as abortion. However, we have far bigger issues on our plate than an issue like that. It’s just not that big of an issue anymore. The future of the democratic republic depends on change. Otherwise, Americans of the future need to get used to a far lower standard of living, and being second or third place on the world stage.
