Free lunch? Yes please, that sounds nice. Hmm, how about a free education with a side of free health care? Why don’t we even throw in student loan forgiveness, free housing, a guaranteed job, or forget the job, and let’s just give – you guessed it – free universal basic income while we are at it.
America’s unique origin in escaping an overbearing, oppressive and overly-taxing government is likely the reason we have historically supported more freedoms, including economic freedoms, than our European cousins. But that is undeniably changing now.
The shifting political winds are reflective of an underlying new positive attitude towards socialism in America. A recent Reuters poll found that 70 percent of Americans support Medicare-for-all, which includes a majority of Republicans. (A new poll released by the Kaiser Family Foundation found support drops, however, when participants were told the plan could lead to higher taxes.)
A Gallup poll from last summer also shows that a majority of millennials view socialism positively, while only 45 percent see capitalism positively. This reflects a double-digit decline for capitalism from eight years ago.
A string of recently-declaring Democratic presidential candidates – Sen. Kamala Harris, D-Calif., Sen. Elizabeth Warren, D-Mass., and Sen. Kirsten Gillibrand, D-N.Y., (to name a few) have literally announced their candidacy alongside a list of the free goodies their presidency would bring. Americans seem unphased, even supportive.
This is our failure America, in not holding our government accountable. They have been allowed for too long to FAKE IT, to spend money that we do not have to pay for services we cannot afford on a sustainable basis. For the last three decades, we have spent significantly more than we have collected in tax revenues resulting in a federal debt of $22 Trillion, all the while maintaining a historically low tax base since Reagan’s reforms.
This has been carried out for the last 30-plus years such that the American people have been lulled into believing that we can spend without end, without the pain of an European tax scheme (40 percent to more than 60-plus percent). So why shouldn’t we add Medicare-for-all, free college education and even UBI – universal basic income?
But it is all an illusion. Economists typically use debt-to-GDP ratios to show that America’s fiscal health is not as bad as Japan, Greece or Italy, among others, but with ending 2018 federal debt at $21.9 trillion and 2018 GDP of just under $21 trillion, we have debt-to-GDP exceeding 100 percent. This is something that is fiscally acceptable during economic downturns, but is unprecedented during good economic times, like those under President Trump.
However, this isn’t even the problem. The real problem is that the gravy train is coming to an abrupt halt soon – a dire shift over 70 years in the making. A shift to the real number that actually matters and whose time is finally come… the fiscal gap. The fiscal gap measures the present value of all future expenditures, including the required interest servicing of the federal debt, less the present value of all expected future tax receipts. Boston University Professor of Economics Laurence Kotlikoff has been advocating for this transparent accounting for years and the US fiscal gap is in excess of $220 Trillion or over 1,000% of GDP. This 1,000% of GDP reflects the arrival of the can that has been kicked down the road for decades as 70% of our Baby Boomer generation will retire en masse moving onto our Social Security and Medicare rolls from 2022 through 2029.
To give a digestible perspective on such an incomprehensible number, the existing fiscal gap currently requires an immediate 64% permanent tax increase to resolve and this is before we add the socialist goodies of Medicare-for-All, free education, and UBI. The left leaning Urban Institute calculated that for just the first ten years alone, Medicare-for-All would cost an additional $32 Trillion! $32T when our total federal debt since the beginning of our republic is $22T… WHAT!
And many on the extreme left promoting the wonders of socialism seem to get tired or annoyed with even addressing the prerequisite questions about their costs, with rising star Rep. Alexandria Ocasio-Cortez, D-N.Y., stating that by spending so much more we will somehow actually have savings. Others say that you can just print more money but inflating our way out of this economic hole is a nonstarter since both Social Security and Medicare make inflation adjusted payments. This means that if we try to inflate our way out, the costs of our biggest social programs just go up proportionally — solving nothing.
There is a certain inherent appeal to equality. But not all equality is an ideal worth pursuing. Freedom, which we innately want as individuals, naturally creates inequality because free people make different choices, one from the other, resulting in different outcomes. Economic equality comes at the price of freedom (yours). People logically act in their own self-interest, so most will take advantage of the government’s offer for ‘free’ anything – thus the reason the road to America is packed while the road to Venezuela is empty.
But let’s be clear – “free” is not free to our country. Although we have gotten away with hiding the unsustainability of our tax and spend policy for the last thirty years, the demographic shockwave that will reverberate as our Boomers retire by the millions, will bring that to an eventual end. The great Roman empire imploded and collapsed under the weight of their own debt and extreme taxation. Why are we so determined to go down that same road?
*Ms. Walser’s article was published on FoxBusiness.com – check it out below: