September 2011

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Sy Schechtman

Time Magazine in a very recent cover story depicts the stark, compelling, woeful story of the Decline and Fall of Europe. And the possibility, or indeed, probability of this utter European malaise affecting us. Especially after the only two healthy European countries, France and Germany, have refused to shoulder the large financial burden of guaranteeing further loans to the beleaguered Euro central bank in Brussels. Which has been somewhat prayerfully renewing the profligate poorer country loans to Greece, Spain and Italy and several other marginal countries.

The high and mighty sole remaining super power –that’s us!---- can still ride almost high and mighty, but with still a good bit of uneasy trepidation. Less than a hundred years ago our country was the financial lender world wide. Now we are the largest debtor nation in the world. Even having its once brightly untarnished spotless triple A credit rating downgraded one small notch to a B, a hardly dubious, but still respectable ranking. But still with many multiple trillions of debt, which caused a Republican controlled House of Representatives—controllers of the nations’ finances--- to balk at raising the debt limit a mere three trillion or so more. From about 11 to 14 trillion. Indeed, by most standards, except to the late Lord Albert Keynes, Paul Krugman, and other very “wild eyed liberal” economists, now an almost breathtaking limit. The old semi sardonic canard was “a million or two or so and soon you’re talking real money….. now a million, that’s chump change….’’. You have got to change the billion to trillion for people to pay attention! But the new Republican controlled House of Representatives is definitely threatening such attention getting tactics. Like no needed congressional approval before much prior approved entitlement programs, many of time honored sanctity---as medicare social security and “sacred cow” federal and state pensions are reviewed and perhaps revised downward. An uneasy feeling is welling up that we just can’t keep “kicking this problem down the street” as the problem starts festering and growing. Politicians and also elected regimes many times also resort to this delaying tactic---political procrastination---as they hope the baying wolf of recession and/or depression does not keep recurring on their current collective doorstep.

Indeed, as of now Medicare will go bankrupt in 2019. The dilemma facing us is the somber prospect of raising taxes to avoid the immediate shortfall of money. Long term, however what has to happen almost immediately is a form of paygo procedure. There are undoubtedly many current recipients of Medicare who have outlived many times the amount of their lifetime contributions and could well afford some sort of co-pay based on their current assets or income. Here what has to happen soon is a means tested approach so that the truly indigent will still not pay and a graduated scale instituted above a certain level for more affluent people. We can thus ease into a more solvent position without hurting the more indigent. The sad truth is that most of the times tax increases have a negative effect. The increased cost, if not carefully disguised, discourages use of the needed service. The initial starting age may also have to be raised and people who smoke or drink should be deemed definite health hazards and charged more. And some deliberate attempt to scour and staunch the “under the table” cash market. Speculation has been rife as to the prodigious size of this mother lode of hidden taxable cash and it should be “rescued” to help lighten the rising flood of debt that threatens to engulf us. It is interesting to recall Ronald Reagan’s practical, “seat of your pants” approach to Social Security taxation. In 1983 he convened a large inner cabinet conference on Social Security funding. Reagan is known for his impressive slashing of taxes and while this was certainly true for most business and corporate taxes he and his associates had to “adjust upward” social security levies to prevent a large shortfall then. This upward adjustment then lasted comfortably until now; now we await even Obama’s currently projected funding “enhancements” with eager anxiety as we try to adjust to the “spending overruns”—deficits!---- we have so far managed to endure and tentatively live with! Reagan was a “practical” ideologue. (Sometimesyou can not score a touchdown and must punt away the ball). Also true was his “defeat” helping Israel, when 250 sleeping marines pursuing anti Israel insurgents were blown up. Reagan immediately apologized to the American people, accepted blame for the Marine Corps negligence and summarily withdrew our troops from the fray. Undeterred, however, was his major thrust against expansionist Soviet aims in Europe, and its ultimate collapse a few years later. Thirty years of Cold War and no human casualties; but his critics complaining bitterly about the costly military buildup!

Cost cutting, and perhaps trimming back some of the existing too generous entitlements and pension plans may be in order but our major goal should be industrial and commercial growth. And certainly reviewing and integrating our foreign policy with a hard look and perhaps scaling back some of our over seas military commitments. But certainly not to neo isolationism! Indeed our main thrust must be investment for present and future growth. That will raise ultimately our much needed revenue stream most positively. Some compromise blend of government regulation but still reinvigoration and support of individual effort and reward. The heart of the capitalist system.

Millions of prospective people still vote with their feet and want to immigrate here every year. They have the hopeful belief that earnest labor will be rewarded in democratic freedom and at least modest middle class largesse or better----for themselves and their children. Ancient Rome had hegemony over most of Europe and adjacent lands for almost seven hundred years; England was the “Great Britannia, who ruled the waves” for over 400 hundred years, and we are really almost a fledging yet protean nation, still a shining beacon of potential and dynamic possibilty.


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