America’s painful fiscal wakeup call

An event happened August 22 that I thought would have a tremendous impact on election year rhetoric. It was the showing of the movie “IOUSA” across the country with a live panel discussion that included financial experts like Warren Buffet.

The movie is a documentary that explores the consequences of this country’s irresponsible fiscal policies that have led to our huge national debt. The general conclusion of the movie was that the size of this debt posed a bigger threat to our future than terrorism.

After watching the last of the Republican National Convention, I’m still stunned that not only did the threat of our debt not get major attention from either of the candidates but also both candidates made more promises of handouts and tax cuts that will further exacerbate the looming crisis.

This in spite of the fact that we seem to be in the midst of a debt-fueled recession where the Fed is severely constrained in what it can do because of our debt and its effect on the value of the dollar.

McCain’s proposals seem to be the most irresponsible by not only preserving all of the Bush tax cuts but also adding a few more of his own. But Obama isn’t far behind with his preserving all the cuts to the middle class and adding some more breaks while raising taxes on the rich and oil companies.

It seems that hard-core Republicans and Democrats have an incurable addiction to promises of handouts and tax cuts from their leaders with little apparent concern for how the goodies will be paid for.

Currently our national debt is approaching $10 trillion and our 2008 deficit will be around $400 billion dollars. But our commitments to the future in programs like paying Social Security and funding Medicare make our total liabilities close to $53 trillion.

If you add to this consumer debt, debt from our trade imbalance and the debt of local governments (most of whom except oil-rich Alaska have unfunded liabilities for pensions and bonds taken out for public works projects), we are floating on a sea of debt. Some day, the piper must be paid, and that will create a bleak future for our children and grandchildren.

Which brings me to health care, because the biggest component of that $53 trillion number is the funding that will be required to run Medicare and Medicaid. This is why health care reform is even more important and why modeling our reforms off of the best practices of European and Japanese health care strategies is important.

Most European countries and Japan spend less by a factor of two per capita than we do on health care with better results in the health of their citizens. This comes from a variety of factors which includes these governments stressing preventative care, forcing cost efficiencies onto hospitals and clinics and putting tough guide-lines on drugs. We use more prescription drugs than the rest of the developed world with a lack of health advantage over other developed countries.

So, the debt is huge and our health care system is a disaster and politicians seem to be unwilling to confront the painful facts Americans need to hear. So what is new? Another issue of the movie was to point out some of the problems that will be caused by this debt and why it posed a greater threat than terrorism.

One of the threats comes from who owns our debt. The list includes many of the energy rich counties that are currently causing problems in the world, i.e. Russia, Iran and Venezuela. Two of the biggest holders of our debt are China and Saudi Arabia. So, if you’re talking about being tough with these countries, realize now that our irresponsible fiscal polices have put powerful fiscal weapons in their hands. They could, at will, send the dollar plummeting by selling off our treasuries if we try to leverage them into becoming more responsible. We depend on the good will and self-interest of countries like Iran when they manage their hoard of our treasuries.

So all this tough talk of protecting the country from terrorists doesn’t have real meaning if we are going to continue putting fiscal weapons in the hands of those who we feel are threats.

So the political conventions were like fantasyland where the candidates promised to be tough on terror while making fiscally irresponsible promises that ran like water flowing over Niagara Falls.

The health care system needs reform, but neither McCain’s nor Obama’s plans do enough to address the cost issues. Both plans protect the interests of HMOs, insurance companies and drug companies in which lie the major drivers of cost.

The often-cited problem with malpractice drives less than 2 percent of the cost problem. The market can be a solution to a portion of our health care problem, but right now we have a system that is freer of government intervention than any developed country and our costs are much worse than any developed country with poorer results. There are places for the market to work its magic but it is obviously not in a for-profit, insurance-driven health care system.

In spite of all the rhetoric from both camps, I’m not sure either candidate is really capable of taking on the special interests. Too many congressmen owe them or are owned by them, whichever is the operative statement.

The fact that neither political party looks to other countries for ideas in solving the problems we face is every bit as bad as when China built the Great Wall and sat behind it thinking it would be the most powerful country in the world forever.

Is there any such thing as a fiscally conservative politician, or has the term fiscal conservative joined the ranks of oxymoron?

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