Kiwanians Get Scoop on Federal Fiscal Policy

Published Oct 20, 2010. By David Shivers.

“That’s some scary stuff,” a Kiwanis of Dougherty member said after seeing and hearing the program presentation on October 18, and he wasn’t talking about the upcoming Halloween holiday.

Warnings about the future impact of national deficit and budget woes were brought into sharp focus in the slide show brought by field director Phil Smith of the Concord Coalition, a nationwide nonpartisan grassroots organization that encourages responsible federal fiscal policy. The organization was founded in 1992 by the late Democrat Sen. Paul Tsongas and Republican Sen. (now retired) Warren Rudman. It is now headed by former Democratic Sen. Bob Kerrey, and its board include former Georgia Sen. Sam Nunn.

“Our mission,” said Smith of the coalition’s “Fiscal Wake Up Tour”, “is to educate Americans on fiscal responsibility as it pertains to the federal budget.”

Using recent figures from sources such as the Congressional Budget Office (CBO), the Government Accountability Office (GAO), Social Security Administration, and the Treasury Department, Smith painted a grim picture of America’s economic future if something isn’t done to alter current fiscal practices.

The nation doesn’t have a balanced budget and is not constitutionally required to have one. The deficit – the total of projected expenditures minus projected revenues – for 2010 is an estimated $1.17 trillion.

The federal budget consists of two types of spending, Smith explained: mandatory and discretionary. Mandatory expenses include areas such as Social Security, Medicare, Medicaid, federal retirement and disability, unemployment, earned income and child tax credits, food stamps, family support, and child nutrition. These outlays have risen from 31 percent of the budget in 1970 to 55 percent in 2010, and with baby boomers beginning to reach retirement age are only expected to continue increasing.

Discretionary spending is divided into defense and nondefense. Nondefense spending encompasses expenditures on education; transportation; housing, energy, and nutrition assistance; natural resources; veterans; foreign aid; general government; and science and space. (Smith said many people think reducing or eliminating foreign aid would help solve the deficit issue, but he noted that foreign aid this year is budgeted at $53 billion out of a total budget of approximately $3.5 trillion

Among highlights of Smith’s presentation:

More than 50 percent of the national debt is owned by foreign entities. “Every year we have a deficit it adds to the national debt,” said Smith, and the more debt, the more the country is dependent on foreign lenders.

America’s population is aging. In 2009 approximately 13 percent of U.S. citizens were over age 65; by 2044, the rate is expected to increase to more than 20 percent. Coupled with the fact Americans are living longer and having fewer children, the result will be fewer workers contributing to the Social Security trust. In 1960 there were 5.1 workers for every SS recipient. By 2029, the ratio is projected to drop to 2.2 workers per recipient. The aging of the population also means increased federal healthcare spending.

Because of these factors, Smith said, “Discretionary spending is being squeezed out by mandatory spending.” Unless something is done, according to projections, in just under 20 years, Social Security, Medicare, Medicaid, and interest spending will consume all federal revenues.

Deficits matter, the Concord Coalition contends, because they reduce national savings; increase dependence on foreign lenders; increase the burden on future generations via debt-service costs and reduction of productivity-enhancing investments; and weaken the ability to meet contingencies or new challenges.  They also raise uncertainty about future economic policies (a hindrance to economic investment) and undermine budget discipline.

Simply growing the economy to override the deficit -   – isn’t feasible either, Smith observed. “We would have to grow the economy 10 percent a year for the next 75 years,” Smith said, to achieve that; the average economic growth rate is only about 3 percent annually.

“You have to be an eternal optimist to work with these issues,” Smith commented, adding, “but we can’t put our heads in the sand.”

Members of the coalition’s “Fiscal Wake Up Tour” may not agree on ideal levels of spending, taxes, and debt, but have found common ground on five key points: current fiscal policy is unsustainable; there are no easy solutions such as cutting waste, fraud, and abuse or growing our way out of the problem; solutions will require bipartisan cooperation and willingess to discuss all options; public engagement and understanding is vital; and, this is not about numbers, it is a moral issue.

A common refrain over the budget/deficit issue has been the fiscal strain it will impose on future generations of taxpayers. In relation to that, Smith cited a line he said he heard years ago: “Misers may make bad next-door neighbors, but they make good ancestors.”