On January 18th Federal Reserve Chairman Ben Bernanke, reminded the US Senate Budget Committee "we are experiencing what seems likely to be the calm before the storm." The chairman's remarks were in reference to entitlement spending.
Mr. Bernanke's predecessor, Alan Greenspan had likewise advised the congress of this problem in no uncertain terms. The storm is now closer .
Mr. Bernanke reported that Medicaid, Medicare and Social Security alone accounted for about 40% of federal spending or about 8-1/2 percent of GDP.
He made reference to Congressional Budget Office Projections which say the cost of those three programs will reach 15% of GDP by 2030.
Applying 15% of GDP to the present budget, spending for these 3 entitlement programs, would take about $2 trillion of our $2.7 trillion dollar budget, leaving little for other government necessities. This scenario would require massive tax increases.
Further, the CBO projections for 2030, say the federal deficit will be close to 9 percent of GDP--more than four times greater than the 2006 deficit.
In 2008, baby boomers become eligible for Social Security, so the number of recipients of Social Security and Medicare starts climbing much faster than in the past. Adding to the problem, there likely will be a hefty increase in the cost per person.
As if that wasn’t enough, the ratio of workers to retirees has fallen from 41 to 1 in the 1940's, to 3 to 1 today, heading eventually, for 2 to 1.
Citing CBO'S projections, Mr. Bernanke proclaimed "the effects on the U.S. economy would be severe."
American voters need not be hit over the head to know the consequences of this data.
Some of the best minds in the country repeatedly tell us that the congressional elections every two years, give us the means to solve these problems, but do they?
Isn’t it true that getting reelected takes priority over solutions with most members of congress?
The Founding Fathers set the path for legislators to serve the country for a short period with modest salaries, so they could return home and make or seek their fortunes in the private sector.
Are Careers In Congress The Problem?
Today with salaries 4 times greater than per capita income, and pensions 2 to 3 times greater than similarly salaried executives in the private sector, most legislators seek a career. Many will do anything or say anything to extend that career.
Regarding pensions, a congressman is eligible for a pension after just 5 years, upon reaching age 50.
A congressman can retire on up to 80% of his salary, presently $168, 000. Cost of living increases can provide a pension, higher than the final salary, in just a few years.
When you factor in the reality that congressmen get reelected in most cases by their ability to "bring home the bacon" it sheds light on Republican spending increases of more than $900 billion since 2001, more than double the rate of inflation.
Democrats, for their part, always fight for higher spending, not every individual, but as a party.
Maybe Democrats will prove us wrong some day and pledge to limit spending by some specific amount, for example the rate of inflation.
In 1994, Republicans pledged specific limits under the Contract With America. Look at the economy that gave us.
We voters must find a way among ourselves to limit how much of the national income we will permit congress to spend.
When FDR was elected, the federal government took less than 4% of GDP, it now takes over 20%. State and local governments take another 15%.
The one number we should all target is spending as a percent of GDP. We can’t get it back to that 4% figure of FDR but something like 18% in 5 years is realistic.
We can achieve that number if enough of us let congress know.
Recall Mr. Bernanke’s admonishment relating to excessive spending "the effects on the U.S. economy would be severe." Cutting spending would have the opposite effect.
Mick McNesby is a former tax advisor, consultant and negotiator. He was a frequent guest on political talk shows in Atlantic City, N.J., discussing the benefits of the lower cost of government. He can be visited at http://conservative-politics-infofind.com
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