As Debt Threatens To Engulf U.S., Aversion To Taxes, Cuts Delays Action

Published Jun 14, 2010. By Todd J. Gillman. In The Dallas Morning News.

Over coffee at the DeSoto library, Janice Buckles, an educator and lifelong Democrat , vents at the angry, shouting activists she sees on TV lately – folks who want to chop government down to size, depriving it of funds needed for the elderly, the poor and the schools.

She's plenty worried about the federal debt, too, $13 trillion and growing – worried it will become a pretext to cut the social safety net.

"I believe in reaching out and helping others," she said. "Those people who earn more – they ought to pay more."

A half-hour away in Rowlett, in Republican territory, Suzan Fulton is sick of Washington. She's the office manager at her husband's financial advising firm. Last year, after 65 years on the political sidelines, she got worried enough about the direction of the country to help start a local tea party group.

Like Buckles, two years her senior, Fulton sees the national debt as a threat to the country's future. But give Washington more money? It would just get wasted. And higher taxes would only choke off growth.

"They have done this for years," Fulton said. " 'Oh, we are in trouble, so we have to raise taxes.' "

There's lots of talk lately in Washington about the hard choices facing the country as the debt hits unprecedented levels. But there's little mystery about the menu of solutions. Spend less, raise taxes, or find ways to grow the economy.

It's as simple as losing weight. Exercise more and eat less. Everyone knows how easy that is.

The options to avert the looming fiscal crisis are just as unpleasant and unpopular, and Americans don't seem ready to embrace any of them. Like dieters who indulge their craving for chocolate cake, they demand costly entitlement programs, a robust military and new highways – but punish leaders who try to cover the costs by raising taxes.

They readily tell pollsters that sacrifices are needed but insist that somebody else should make them.

Politicians aren't known for misreading the electorate; if voters wanted sacrifice, they would get it. So for anyone frustrated with the paralysis in Washington, a glance in the mirror might help explain it.

 

'So-called middle class'

 

Toland and Meochia Watkins grew up in Dallas and met at Jarvis Christian College in East Texas. Now they live in DeSoto, the heart of Dallas' only Democratic congressional district, represented by Rep. Eddie Bernice Johnson of Dallas.

His parents are 59 and still working, still paying into Social Security – a program the Watkinses, like many Americans, doubt will be there whenever they retire. Her dad is retired military and relies on veterans benefits.

She is 38 and tests circuits at Verizon. He's 39. As a U.S. Department of Labor data specialist, he chronicles the ebb and flow of the workforce. They dress nicely. They bought a three-bedroom home seven years ago.

"We're the so-called middle class," Toland Watkins said.

One employer he tracked grew from nothing to 50 workers. Another recently shut down a call center, lopping 200 jobs in one stroke. "He said, 'Toland, times are hard.' ... I hear the bad and the good of it."

Traditional Democrats, the Watkinses believe strongly in government's role protecting the elderly and impoverished.

Their son and daughter are 14 and 6. Before they can even drive, each is effectively saddled with $43,000 of the national debt.

"It seems like way back when, they [policymakers] used to think about the future or plan for rainy days," the mom said. "We just don't do that anymore."

Her husband blames much of the debt problem on George W  . Bush. Bush, he noted, inherited a budget surplus and then boosted spending – for two wars and a new prescription drug benefit for seniors, in particular – while also insisting on tax cuts. By the time Barack Obama took over, the deficit was $1 trillion, so it irritates Watkins to hear Republicans point fingers at Democrats for fiscal missteps.

As an Army veteran, he backed Bush's call to war in Iraq , until the justifications proved unfounded and no-bid contracts with well-connected defense firms drove up costs. "I was gung-ho. ... I'm like, 'Yeah, get em!' " he said.

Now, that's where he would start if anyone put a budget ax in his hand.

By contrast, he and his wife would have the government spend "whatever they need" on education, he said. And they would protect Social Security and Medicare and any other programs that ease the financial burden on seniors.

Even the idea of making folks who are decades from retirement, like themselves, wait a few extra years to collect doesn't sound right.

"I don't feel as a country we do enough to help our elderly," Meochia Watkins said.

 

No 'palatable options'

 

This year alone, the federal government will spend $1.9 trillion more than it collects – a record – on everything from pills for Grandma to new highways, unmanned drones and school lunches.

By 2020, the Congressional Budget Office says, the budget will be $5.67 trillion, with a $1.254 trillion deficit. The government will owe $20.3 trillion, the equivalent of 90 percent of the nation's economic output. Even if borrowing costs stay at historic lows – a dubious assumption – interest alone will soak up an astonishing $1 trillion.

That's $1,000,000,000,000 each year, from China, Saudi Arabia or other lenders, or from U.S. taxpayers, before the government can build a flood-control levee, replace an aging spy satellite, feed a hungry child or hire a new Border Patrol agent.

Smaller countries faced with such imbalances run out of options. At risk of social and political upheaval, they resort to sharply higher taxes; fire teachers, police and other civil servants; slash pensions; and scale back public services.

"Whether you want tax cuts or more spending for education, debt is your worst enemy," said Bruce Reed  , executive director of the new White House commission charged with suggesting remedies later this year.

The only bright spot, he added, is that "there are plenty of hard choices to choose from."

When Dallas billionaire Ross Perot built a third-party presidential bid in 1992 on fears of untenable debt, Washington was borrowing $1 billion a day and owed $4 trillion – less than 50 percent of U.S. economic output.

Ah, the good old days.

"People get that we have a problem. It's getting people to do anything meaningful about it that's the issue," said Robert Bixby, executive director of the bipartisan Concord Coalition, which has long advocated for more sound fiscal policies. "There are no politically palatable options."

 

Higher taxes? No way

 

Voters, like many politicians, often blame deficits on relatively minor components of the budget.

Does foreign aid suck up a quarter of the budget? Many Americans think so. It's actually under 1 percent.

Social Security and Medicare alone account for a third of federal spending. About one-quarter goes to health care and food for the poor and payments for the unemployed. Defense is the next-biggest outlay, followed by interest on the debt itself.

Housing, highways and all the rest add up to only about 20 percent of the budget.

The bogeymen vary, depending on one's political views.

Tom Fulton, for instance, would eagerly gut the Education Department – which accounts for about 1.5 percent of the budget. He figures that efficiency experts could squeeze 20 percent across the board, even after decades of crusades in Washington against waste, fraud and abuse.

"There's mismanagement in every one of these programs," said Fulton, 67, a financial adviser in Rowlett, the heart of conservative U.S. Rep. Jeb Hensarling's district.

From a converted bank building with an ancient walk-in safe, and a coin jar labeled "What the IRS Missed," Fulton spins tales and nurses the savings of a few hundred clients.

Suzan, his wife, manages the office and volunteers at the local tea party and a community theater. Their son handles the computers.

"I wish I had five or six more employees, so I could fire 'em" and cut costs, Fulton joked.

The debt problem hovers over him and his clients. "It scares the heck out of everybody. We are real close to being like Greece," he said.

The comparison isn't precise. Greece is far smaller, and its debt topped 170 percent of the national economy, almost double the current U.S. ratio. Still, Fulton said, the deadly riots that ensued when Athens cut pensions and raised taxes should alarm anyone.

"If we don't change, the people that thought they had a free ride – there's not going to be money to take care of anybody," he said.

Obama? An "idiot." But Fulton is "not real big on Republicans either." In the 1980s, when Ronald Reagan signed off on capital gains tax changes, his business took a beating.

Survival meant paring expenses radically, at home and at the office – a lesson that still colors his personal and political outlook.

To slow federal spending, Fulton would raise the eligibility age for Social Security to the mid-70s, or even older. Unlike some Republicans, he also would trim defense spending – 18 percent of the budget – though with two wars, he conceded that might take time.

"There's no sacred cows when you're going broke," Fulton said. "It isn't complicated. ... You have to not spend more than you take in."

But higher taxes? No way. He illustrates why with a parable of two daughters.

The first has always been prudent, but she's fallen on hard times. Her baby is sick and she needs $500 to cover the rent. "You're going to give her money," he said.

The other is "a worthless kid," a ne'er-do-well who routinely seeks handouts and blows the money on fancy cars and houses.

"You're finally going to say to hell with it," Fulton said. "We're saying to hell with the government, because they want to waste money. Doggone it, it's frustrating. I love the country and I hate to see it. I hate to see our irresponsibility."

 

Tax 'the superstars'

 

Anti-tax sentiment is common in both parties.

The Watkinses are all for higher taxes, for instance, as long as they hit someone else.

"The Baracks, the Oprahs, the superstars – get 'em. Take it," Toland Watkins said. "If I become a billionaire, hey, I expect to give. Your problems are not our problems."

Last year, 11.1 percent of Americans' personal income went to taxes – the least since 1950 and well below the peak of 18.6 percent a decade ago.

To some degree, the public seems to grasp that. In more than a half-century of gauging opinion about the tax burden, Gallup pollsters invariably hear grumbling about excessive taxes. Some years, 70 percent of Americans complain. Yet for the last two years, a majority called their own tax burden "about right."

That suggests maneuvering room for policymakers – if not for the public's mixed signals.

More than 8 in 10 Americans tell pollsters that cutting the deficit will require sacrifice by the middle class. Just as many, however, object to slowing the growth of Social Security and Medicare benefits, and to hiking taxes on anyone earning less than $250,000.

Then there's the widely held view that earmarks – spending directed by influential lawmakers without a full debate or presidential request – are a major source of red ink.

Bridges to nowhere and $500,000 paint jobs for jumbo jets generate headlines and outrage. But earmarks also support cancer research and cutting-edge military equipment. And, contrary to popular belief, they're carved from whatever Congress planned to spend anyway, so they don't directly inflate the budget.

Still, critics say that if lawmakers can casually devote $2.6 million to potato research, they probably can't balance the budget.

In any case, the math is hard to ignore. In this year's $3.7 trillion budget, earmarks amount to $16.5 billion, little more than a rounding error. Over the last 20 years, watchdog groups have found $306 billion worth, out of $39 trillion spent.

Imagine buckets of sand on a beach.

No wonder many fiscal experts consider it daunting, if not impossible, to balance the budget solely by holding down spending.

 

'People are suffering'

 

What is indisputable is that navigating the public's sincere but contradictory demands – for lower taxes and high levels of service – would challenge any politician.

Buckles, the DeSoto Democrat, has little patience for those who rail at government as if they and their neighbors don't enjoy the fruits of the nation's collective bounty.

"People are suffering, and people need work. You have to circulate money to make money," she said.

When Timothy McVeigh bombed the federal building in Oklahoma City , she felt the blast from her home in nearby Lawton. Now, she worries that mounting debt will rekindle anti-government extremism.

Her parents were tenant farmers in Oklahoma. They raised wheat and cattle, and always struggled. "They were middle class, and they could never get ahead," she said. "The rich get richer."

She's 67, divorced for 18 years. She moved to DeSoto to live near her daughter. Her son teaches tax law in Houston.

As a college professor in Oklahoma, Louisiana and Texas, Buckles spent her career educating teachers and rarely earned more than $60,000 a year. She retired last year and works part time at Cedar Hill Community College to supplement her $1,069 monthly Social Security payments – a sum so modest, she considers it wrong to cut payments for future retirees or to make them wait longer to collect.

"How would you like to live on that?" she said.

Having taught in New Orleans before Katrina, she's seen plenty of crumbling schools where children are stuck with ratty, outdated textbooks.

"We've spent so much money on the war and on foreign aid," she said. "We need to put our money in the right places."

 

Culture of spending

 

Just a few miles away on the west side of Cedar Hill – in a Republican congressional district represented by Rep. Kenny Marchant of Coppell – computer consultant Steve Agee blames a general culture of overspending.

He's dubious that health care and Social Security, let alone Iraq and Afghanistan , are the main debt culprits.

"To some degree, the war has given everybody a little bit of an excuse," he said. Still, "I don't lose sleep over it. Maybe because it's so big. Trillions of dollars is way beyond comprehension."

In his view, flawed accounting rules imposed in the last decade and mismanagement at the big mortgage lender Fannie Mae helped trigger the economic crisis. That implies that tax hikes aren't the solution. As a self-employed business owner, he already pays both sides of his own payroll taxes, and his income is taxed in one of the top brackets.

"We're paying an awful lot of taxes already," Agee said. "We've got to be smarter in our spending. We've got to decrease the size of government."

He's 49. His wife, Carisa, is a stay-at-home mom. Their daughters are 13 and 21 – the older will graduate from college in a year. They live comfortably on a corner lot on a tree-lined street.

These are solid Republican voters who are hardly uncritical of the last GOP administration – the Bush-initiated bailouts and the unrestrained spending. But Obama makes Agee far more nervous.

"It's almost Republican levels of spending, and I mean that in a bad way," he said.

He is chairman of the elders at a conservative church in DeSoto, and religion informs his worldview. So while he rejects the idea that "the federal government has to solve every problem," he believes deeply in looking after the homeless, poor and elderly. He just wants that responsibility to rest with churches and families.

Case in point: the new health care law. He can't understand why health care costs rise so much faster than inflation but says that "forcing people into insurance doesn't resonate real well with me."

It came as a huge relief when Democrats lost their filibuster-proof grip on the Senate early this year. "We've got to have a good balance, looking at things from a social perspective and from a business perspective," Agee said.

He has little trust in Congress, though. Without term limits, lawmakers are always eyeing the next election. That deters long-term planning, let alone policies that might anger voters.

"We're all pain-averse," he said, "and that's why our hands are tied."

Voters were unforgiving when the first President George Bush, facing harsh fiscal realities, broke his "read my lips" pledge to never raise taxes. Politicians ever since have taken that lesson to heart.

"The premise I'd like to see tested," said Bixby, of the Concord Coalition, "is whether you have to pander to the public. Maybe you do. If that's the case, we're never going to fix the problem."