Sunday in Charleston was glorious. Through the day I watched as a virtual regatta of boats filled the harbor coming and going with people seemingly oblivious to the fact that our country took another step closer to the brink last week. It didn’t register.
News of Social Security’s rising financial stresses came out last Monday and its coverage on Tuesday was interesting. The front page here in Charleston included a Summerville car-jacking and NFL talent testing, while news of Social Security’s deteriorating situation was relegated to a column on the right side of the business section.
To the credit of the Post and Courier, it editorialized on the matter on Sunday, but what I kept waiting for through the week on some level of further coverage never materialized. TV airwaves were filled with news on the one-cow incidence of Mad Cow disease and the New Orleans Saints football eavesdropping scandal.
President Obama punted and instead offered a way to spend more money by continuing to subsidize student loan interest costs, while the presumptive Republican nominee for president simply said “me, too” on digging our financial hole deeper with the student loan issue. The silence on the financial train wreck headed our way has been deafening, and if leaders and the media are quiet on it there is little chance those folks in the Charleston boats are going to spend a lot of time worrying about it.
Immediate matters in media as does the sensational — the saying is that “if it bleeds it leads,” and so I suppose I should not have been surprised by the week’s coverage. What it says to me is that it’s up to us. We have to wake both politicians and the media on this one, but it won’t be easy. I spent nearly 20 years of my life trying to raise government spending as an issue, and by virtue of differing incentives neither group wants to focus here. But if we don’t wake them we are going to sleepwalk our way right into a financial tsunami.
Here is the simple math in last week’s report. The Social Security Trust fund will be exhausted three years earlier than last year’s report claimed, and the Disability Trust Fund will be out of cash in just four years. In some ways those numbers are old news. The Disability Fund has been running shortfalls since 2005, and last year’s Trustees Report showed the overall trust fund would be exhausted a year earlier than they had suggested the year before.
What’s relevant is cash flow, the trend and the way the financial knot is tightening. The trend of negative cash flow in the categories (entitlement spending) where our federal government spends the most became significant last year. For the first time since Social Security was reformed more than 30 years ago it began spending more than comes in each year. It is projected now to run increasing deficits going forward as 60 million baby boomers retire in growing numbers. While the financial strains on the system intensify, the Trust Fund of $2.5 trillion that Social Security will supposedly draw from is an accounting fiction. Medicare’s numbers are even worse. Since the time the Unified Budget was put in place during Lyndon Johnson’s administration, every dollar that went into Washington got spent — nothing was saved in a trust fund.
Many argue the Unified Budget was put in place to hide the real cost of running both a war in Vietnam and a war at home on poverty, but the greater masking has been the illusion of Washington trust funds. The fund additions have been nothing more than bookkeeping entries that represented the future taxing authority of the United States government. And this is where the knot tightens for all of us. Our federal government doesn’t have the money to pay what’s due. Politics being politics means they usually take the path of least resistance which suggests both borrowing and printing more to keep the party going. Unfortunately these parties never end well.
Economists Carmen Reinhart and Kenneth Rogoff wrote a book entitled “This Time is Different,” which chronicles the last 800 years of financial crises. In it they detail the ways civilizations extinguish themselves in precisely the type spending trap we are now setting. Why cut government when the easiest path will be more of the same — borrowing and printing?
If that’s the path, we would be wise to listen to Alexis De Tocqueville, who noted in the 1800s, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
This week we got a few years closer to that bribe, and it vital we not only reject it — but wake others to the fact that it’s soon coming.
Mark Sanford, a Republican, represented South Carolina’s 1st District in the U.S. House from 1995-2001 and was governor of South Carolina from 2003-11.