The American public is finally coming to grips with the consequences of going over the fiscal cliff, even as special interest groups fiercely protect territory abducted in previous legislative battles. Nobody should be shocked by this development, except Generation X who came late to the beer party and could be stuck with the entire tab.
Inebriated citizens notwithstanding, the bills are finally coming due. Congress, heaving under the invisible weight of $16 trillion, spent decades ostracizing anyone who would challenge their math. Those who discussed the accumulating debt were caricatured as noble street preachers, scoffed at and dismissed by budget chairmen with a congenial disregard usually reserved for less formal settings.
And yet the fiscal cliff appears before us.
Should the scheduled sequestration go into effect on January 1, 2013, the economy is projected to contract at an annualized rate of 2.9 percent in the first half of 2013 and by 0.5 percent over the entire year. Moreover, the unemployment rate could rise to 9.1 percent at the end of the year from 7.7 percent today. Unfortunately, a sluggish economy would mitigate government revenue required to service the debt, while taking no action at all would increase the nation’s burden by $7.5 trillion.
Throughout this tug of incomplete policies, it’s been understood that out of control government spending led to this inevitable showdown. According to “White House Burning”, however, non-defense discretionary outlays have been four percent of GDP for the last 50 years, suggesting that our demand for government cuts has been largely misdirected. Truth be told, the increasing expenditures are a direct result of the rising cost of entitlement benefits, as people are living longer and health care costs have been skyrocketing for decades.
Meanwhile, social security retirement and disability trust funds would be depleted in 2033 and incoming revenue would only be enough to cover three-quarters of scheduled benefits. Furthermore, the Medicare Trustees now claim that trust fund will be exhausted by 2024. It seems that Generation X has bad timing, born too late to benefit from the profligate spending and still old enough to suffer the consequences.
In fact, one could make the argument that the demographic with the most to lose has yet to consolidate its political power and influence policy. Virtually every proposed solution to the entitlement shortfalls concentrates the sacrifices on a generation with little responsibility, whether it involves raising FICA taxes on younger workers during their peak earning years, delaying full retirement age or lowering the CPI growth assumptions for social security.
The AARP already has a well-deserved seat at the table, defending the interests of Baby Boomers who aggregately voted for low taxes, small government and personal responsibility. In light of the unfunded entitlement liabilities, it’s worth mentioning that seniors receive far more in services than they pay into the system.
Nevertheless, a staunch advocacy group for Generation X is largely absent from the discussion despite having few crumbs from the cookie jar visible on their fingers. If we’re serious about addressing the greatest fiscal dilemma in our nation’s history, the entire populace will have to cut back, pitch in and shoulder the weight of reckless economic policies.
In the absence of all voices being heard and incorporated into viable solutions, subsequent legislation may be to the detriment of future job creators, something that has already been addressed with great volume.