Young Guns : A New Generation of Conservative Leaders (14 page)

As Eric has already written, too much of our recent political history has been spent trading accusations about which political party cares about the American people more than the other. There’s been seemingly constant competition to brand one party the party that’s in it for the people and the other party the party that’s in it for themselves. As usual, Washington has been treating the American people like children, not talking about substantive differences, just calling each other names. My party: good. Your party: bad.

But this argument—whoever makes it, Democrat or Republican—is a distraction. I truly believe that most Americans regardless of party agree that the status quo is unacceptable. Republican and Democratic partisans both know that Americans are hurting. We know that too many Americans are out of work or in grim fear of losing their jobs. We know that health-care costs are out of control. They’re bankrupting our small businesses, they’re bankrupting families, and they’re bankrupting our government.

The fundamental difference in American politics today
isn’t about who cares the most, it’s about which party is committed to the ideas and principles that have never failed in the past to solve our nation’s problems while preserving individual freedom and equal opportunity. And here, we don’t agree with the party that currently dominates Washington. We have real differences. In fact, Washington’s self-proclaimed Progressives see the crisis in spending and debt coming just as clearly as we do. The difference is, they’re not interested in applying the brakes. They
want
to see America hurtle past the point of no return. They welcome the level of government spending and the level of government control in our lives that’s necessary for a European-style welfare state. Their paternalistic philosophy calls for a self-reinforcing expansion of government. This isn’t just a narrow political ploy on their part, although an ever-growing population dependent on government is good for the party of government. In advocating governmentcontrolled health care and a national energy tax, Progressives are showing the zeal of their ideological convictions. They truly
believe
the best course for America is to abandon the American idea for a model much like the European Union.

We believe these latter-day Progressives could not be more mistaken, about both the meaning of America and the passion of Americans for the idea that still makes this nation an exception in the world.

The result is that today America is faced with a choice of two futures, a choice that has rarely before been so clear and so consequential.

Think of this choice in terms of your own family. Imagine your family’s future if you spent and borrowed like Washington does today and like Progressivists want to accelerate in the future. You’d owe $60 in credit card loans for every $100 of income. Every month you’d pay back a little but borrow even more. In ten years, you’ll owe $87 for every $100 you make. Eventually, you have no choice but to hand off your debt to your kids. If they worked until 2035, they’d owe more than $180 for every $100 they earned. In 2050, your grandkids will owe more than $320 for every $100 they make. By 2080 they will owe seven times their earnings. Of course, the world’s loan windows would slam shut long before then, but this is the path our government is on right now—the one Washington Progressives want us to go down even faster. It is the path to financial ruin and corrupted national character. It is choice number one.

Choice number two is a very different future. Imagine your family working, paying its bills, and enjoying a government that respects your work by allowing you to keep more of what you earn. If you’re out of work, dynamic, results-based job training is available. As you look toward retirement, you know that a preserved and strengthened Social Security will be there, as well as your own safe and secure personal investments. Access to quality health coverage is universal and affordable because you and your family are at the center of a competitive, market-based system. If you lose your income because times get tough, a safety net
is there to provide health care for you and your family. But at the end of the day, you have this confidence: you can reach high and provide a better life for your children and grandchildren because government hasn’t taken the optimism and opportunity of America and turned it into stagnation or outright decline.

This is the choice that faces every American in 2010 and in the years to come. Some critics portray this as a choice between government and no government; between a life of safety and security in the nanny state and a nasty, brutish, and short life in a Hobbesian state of nature. In doing so, they employ raw fear in order to persuade us to accept a powerful Leviathan state as the only answer to our fear of the unknown future.

But the American people aren’t children, and the choice before us isn’t one of security versus insecurity, or safety versus fear. We are offering Americans the same choice as Ronald Reagan did more than a quarter century ago when he said: “It is not my intention to do away with government. It is, rather, to make it work—work with us, not over us; to stand by our side, not ride on our back. Government can and must provide opportunity, not smother it; foster productivity, not stifle it.”

This fundamental choice has been debated in the name of many different things over the past year and a half: health-care reform, energy policy, economic policy, housing policy. But ultimately it’s a debate about what kind of country we want to have.

What exactly do I mean when I say America is approaching a “tipping point”? In terms of the American political economy, I mean the point at which a critical mass of Americans receives more in government benefits than they pay in taxes.

Today, America is perilously close to this point. According to the Tax Foundation, 60 percent of Americans already receive more in benefits and services from the government than they pay in taxes. That means 60 percent of Americans don’t bear the cost of the government they receive, so they don’t have any incentive not to demand bigger government. Don’t get me wrong. I’m all for the lowest taxes possible on the American people. But democracy itself becomes dangerously corrupted when the majority of people contribute little or nothing to pay for expanded government. The answer isn’t for Americans to pay more taxes, but for government to be limited, and for all Americans to keep more of what they earn.

But in addition to the fiscal tipping point toward which we’re hurtling, there is an even more important cultural transformation that America is approaching. Growing dependence on government threatens to transform the fundamental character of our country away from a culture of initiative and independence.

We’ve already seen this happen in many Western European countries. There, dependence on the government for
their livelihoods turns into a complacency that has been described as soft despotism, where the benefits granted by government become far more important to most people than the precious right and power to govern themselves as individuals and as a society. Individuals become more timid, more worried about their securities than their liberties, more concerned to receive their government benefits than get ahead and make the most of their lives. The result is that these countries have high rates of taxation and persistent unemployment, coupled with low rates of productivity and growth. The Joint Economic Committee looked at twenty-three industrialized countries and found that countries with government spending in excess of 40 percent of GDP had half the average rate of economic growth as countries with less government. They may have government-mandated two-month vacations, but they have the high taxes and the high unemployment rates to match.

But that can’t happen in America, right? Wrong. It
is
happening. Even though we don’t yet have the kind of welfare state they have in Europe, our spending on entitlement programs like Social Security, Medicare, and Medicaid is on an unsustainable path. These programs are sacred trusts that we’ve made with elderly and poor Americans. But their very existence is threatened by a demographic wave that we know is coming. As the baby boomers grow older and retire, millions more will be added to the rolls of these entitlement programs. Americans are used to politicians talking about this coming crisis and then doing absolutely
nothing about it. But we no longer have the luxury of kicking the can down the road. And thanks to the gusher of spending that has occurred in Washington over the past year and a half, we have even less time than before to save these programs.

The main drivers of our deepening deficits are the two major government health-care programs, Medicare and Medicaid. Together, they consume 22 percent of the federal budget—more than national defense, including the costs of the two wars. The problem is most acute in Medicare. Like Social Security, Medicare faces the daunting demographic challenge of supporting the baby boomers as they retire. But its much larger problem is that of medical costs, which are rising at roughly double the rate of growth in the economy. Today Medicare has an unfunded liability—or a deficit of projected revenues under projected costs—of $38 trillion over the next seventy-five years. This means that the federal government would have to set aside $38 trillion today to cover future benefits for the three generations of Americans: retirees, workers, and children. This translates to a burden of about $335,350 per U.S. household.

But that’s just the beginning of the bad news. Because of ever-increasing numbers of new beneficiaries, skyrocketing health-care costs, and recently enacted health-care overhaul that will drive costs up, not down, this burden on American families will worsen rapidly. By 2014, Medicare’s unfunded liability is projected to grow to $52 trillion, or about $458,900 per household.

Meanwhile, Social Security has gone bankrupt ahead of schedule. The same week in March that President Obama signed into law a new multitrillion dollar health-care entitlement, the Congressional Budget Office announced that in 2010 Social Security will pay out more in benefits than it receives in taxes. Social Security had been expected to hit this breaking point in 2016, but the recession is putting America’s spiral into the red ahead of schedule. At this rate, in order to keep the program solvent, government will face the seemingly untenable choice of either cutting Social Security benefits nearly 25 percent or raising payroll taxes more than 30 percent.

When Social Security and Medicare are taken together, our total unfunded entitlement liability is $43 trillion, or about $379,475 for each and every American household.

In five years, that total will grow to $57 trillion, or over a half a million dollars—$500,414—per American family, rich or poor.

Taxes could be raised to pay for this massive spending. But our economy cannot withstand the levels of taxation necessary to finance this level of spending. The Congressional Budget Office found that by 2080, income tax rates (individual and corporate rates) would have to more than double to fund the projected spending path. Specifically, the current 10-percent income tax bracket would rise to 25 percent, and the current middle bracket of 25 percent would have to increase to 63 percent. The current top rate of 35 percent would rise to 88 percent. For the average family
of four, that means a more than doubling of their income tax, from $3,100 today to $7,750—and this increase doesn’t even include payroll taxes. The CBO provided these numbers
before
our cataclysmic recession, before Washington’s reckless spending spree, and before the massive health-care budget buster.

The other option, if we don’t change course, is to borrow the money we need. But as government borrows more, less capital is available for more productive private-sector investment. The United States already relies on foreign investors like China to finance about half of our debt. And as this debt rises, these investors will come to realize that the path of the deficit is unsustainable. The likely result is that they will reduce their purchases of U.S. securities (our debt), which will cause the dollar to be worth less on the international market. With the dollar worth less, lenders will raise interest rates to compensate, and the higher cost of borrowing will put upward pressure on consumer prices. This combination of high-interest rates and inflation will lower business profits and crash the stock market.

But more importantly, the standard of living of individual Americans will suffer devastating consequences. Our children—Americans born today—will face fewer jobs and stagnant incomes as they complete college and enter the workplace. By 2050, workers and families will begin seeing an erosion of their wages and incomes. By 2058, the economy will enter a free fall. Beyond that point, economists
can’t measure the impact on standards of living because the debt rises to levels the economy simply can’t support.