Archive for July 21st, 2010

The Thinker

The age of limits

The motto for the University of Central Florida (where I got my bachelor’s degree) is “Reach for the stars”. For a university less than an hour’s drive to Cape Canaveral it is an appropriate motto. While UCF will continue reaching for the stars, the world in general and America in particular is realizing that reaching for the stars is unaffordable.

I am not speaking specifically about the space program although we are “reaching for the stars” a lot less than we used to. For example, the Obama administration is trying (wisely, I think) to retire the space shuttle. It also has the novel idea that in the future, the private sector should provide the government with a service to get astronauts into earth orbit and back. High unemployment and exploding deficits seem to be generating a bipartisan consensus that we now have more government than we can afford.  Believe it or not, I agree.

It is my opinion that given our modern world we probably need more government, at least for select programs. However, I don’t see how to pay for these programs without cutting others. Granted, the government can be staggeringly inefficient. While certain agencies are very efficient and indeed innovative, others are hugely wasteful. This week’s Washington Post investigation into the proliferating and apparently overlapping authorities working in the murky and high-classified world of counterterrorism shows good intentions gone seriously awry. There appears to be no central authority managing all this. We do have a Director of National Intelligence but in reality, the DNI is more of a coordinator than a director, as he does not have budget authority. This explains the high turnover among DNIs. Even if he did have the authority, it would prove a Herculean task to align our counterterrorism priorities with this kudzu of agencies and contractors and their proliferating and overlapping missions.

The main reason the United States is not reaching for the stars is that a lot of genuinely needed government is squeezed by the steadily increasing costs of entitlements. These entitlements are principally Social Security, Medicare and Medicaid, although the list could also be expanded to include items like federal pensions. Arguably, we could actually get both health insurance costs under control, push it out on the private sector, pay a whole lot less and cover all Americans if we adopted the Japanese health care model. Perhaps we will get there someday but right now, we prefer to dither around the edges. The recently enacted health care legislation is a step in the right direction, but only a step.

Efficiencies in government programs are fine, but ultimately all government must be paid for with taxes. However, you can only pay taxes in relation to your income. With less income, less discretionary money to spend, and with more of it allocated toward health care, the consumer can no longer prop up the economy, which reduces economic growth. Moreover, if economic growth slows or halts, tax revenues must slow as well.

As Joe Bageant depressingly points out, future economic growth also assumes that nature will keep providing us with its bounty in endless supply. It assumes that we be able to find new affordable sources of mineral wealth and endless new tracts of land for agriculture and housing needed for a burgeoning population. Unfortunately, it appears that most of the easily available minerals have been extracted, which means the cost of living is going up. If our income does not keep pace then our standard of living is likely to be lower. Moreover, land is also finite. We cannot continue to grow forever by developing unspoiled land. Survival itself is predicated on the existence of nature. In short, growth is becoming more expensive. The more we grow, the more it costs to grow, and the less benefit there is to growth.

Thinking Americans seem to understand that we have reached a nebulous growth limit. If we can grow our way out of our economic problems, it will be at an unacceptable cost. We saw what the cost was recently with the Deepwater Horizon oil spill. Moving to an energy economy based on renewable energy is certainly more desirable than our current hydrocarbon-based economy, which among other things made June 2010 the hottest June on record. Our structural problems though are far larger than creating a clean energy future.

The real problem is we have reached a critical mass of people. Since 1970, the United States increased its population roughly by half: another hundred million people. From now on, population growth is going to introduce disproportionately negative effects. Unfortunately, at least in the short term, population growth is unstoppable. This means that the cost of living is going to increase, as more of us compete for fewer and more expensive resources.

The effects are being borne out not just at the federal government, but at state and local governments as well. As costs eat away at income, there is less revenue available for governments. Inevitably, this means fewer services. However, right now it seems impossible to come to consensus on how to address the problem. If government must be cut, what should be cut first? Since we essentially have government by corporation, it is likely that corporate interests will triumph over the needs of citizens.

Inevitably, something must give. In fact, that something is already giving. All sides seem to acknowledge our problems are structural, but parties are unwilling to move from ideology toward pragmatic solutions. Republicans will block any tax increases if they can, even if, as in the case of repealing tax cuts for the rich, there is plenty of ability to pay. Democrats seem loathe to admit that any part of the welfare state needs to be trimmed back. Most think that with the right mixture of pixie dust we can maintain the welfare state without raising taxes on the middle class. Right now Democrats are content with the delusion that health care reform will change the dynamics of runaway spending, when it will not. Even President Obama understands this. He has stated that it will only slow the growth of health care spending.

It won’t help in November if voters respond to their frustrations and visceral fears by electing more ideologues to Congress. This merely extends our national dysfunction, adding to the final bill. Perhaps Tea Partiers secretly hope that if elected they can effectively bring about the collapse of the federal government, thus allowing government to be reconstituted under a smaller federal model. Newt Gingrich tried it in 1995. Maybe it will work in 2011.

Even if they succeed, reducing the scope of the federal government will not really address the central issue. Reducing the scope of the federal government merely pushes costs back on state and local governments. For example, states already pay hefty shares of Medicaid services. If the federal government were simply to stop contributing to Medicaid, states would either need to pick up the slack, drastically cut Medicaid services or end Medicaid altogether. Unfortunately, ending Medicaid altogether does not solve the problem of treating poor people’s medical problems. It would simply extend lines at emergency rooms and push up already high health care premiums, which would make more people lose health care coverage. To “solve” this problem would mean to not solve it at all: simply not treat those who cannot afford to pay. Let ‘em eat cake, I guess.

Unless things are fundamentally realigned in a workable way, many of these sorts of horrible choices are in our future. If we acted united rather than divided, we could manage these problems with much less pain. Social security, for example, is not in much financial trouble and extending the retirement age can make it solvent with no increase in taxes. The real problems are in wasteful and hugely overpriced health care programs, which are exacerbated by our unwillingness to eat right and exercise, perhaps because lower income Americans simply cannot afford healthy food. Our choices here are stark: either do away with health insurance except for the increasingly smaller proportion of people moneyed enough to afford it, or institute the sort of “socialized” medicine anathema to so many on the right, whose effect might well be the rationing they fear. (We already have rationing based on ability to pay. What terrifies the right is that a physician might be required to put someone with less money but a more chronic condition ahead of their ability to get care.)

In an age of limits, other sacrosanct programs must now become touchable. Even Secretary of Defense Robert Gates understands that in a weak economy runaway military spending cannot be sustained indefinitely. Consensus seems to be forming that our War on Terror, or at least in Afghanistan and Iraq, are no longer affordable nor are they buying us national security.

There is plenty of general government bloat that could be removed if we could summon the nerve; it’s not just where a lot of politicians think it is. Bloat includes the excessive and overlapping national security programs The Washington Post documented, huge and wasteful agricultural subsidies, corporate welfare in general, Medicare and Medicaid payment reform, and even our manned spaceflight program. We should not be cutting those services that are vitally needed to run our complex and increasingly interconnected world. Some of these agencies arguably need more money. These include the FDA, FAA, FCC, NIH, TSA and the SEC, to name a few. These agencies in reality spend only pocket change yet provide invaluable and absolutely necessary services.

The glass half-full news is that we are hardly alone. Even China at some point will have to scale back its growth and limit its services. Countries like China less leveraged by debt will have more breathing room, but the dynamics of population growth and resource limitations are inescapable for all nations. The more we resist these dynamics, the harder things are going to be.

Nature is trying to tell us to live simpler. We need to start listening.

 

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