Too much pessimism
There is too much long-term pessimism on these boards, as evidenced, for example, by russiangambit's posts. Almost everybody sees some iceberg ahead: we can't afford Social security, we can't afford military spending, the budget deficit will destroy us, blah-blah-blah. Interestingly, the same people often remain optimistic about the short term - the nearest 3-5 years or so. As for me, it's quite the contrary. I'm fairly pessimistic about the next 5 years, but optimistic about the long run.
The way I see it is this. We will certainly come up with the solution to all these problems, but we will only come up with the solution when it can no longer be postponed. If you think governments start reforms out of the goodness of their heart, then you shouldn't even be on these boards. You're too naive to invest in the stock market, period. Changes will come at the moment when they can no longer be avoided. Not a second earlier and not a second later.
And then there is the question: can these problems be solved at all? You bet.
When you hear that balancing the budget is impossible, paying for entitlements is impossible, solving the healthcare impasse is impossible, you should know that you just heard a damned lie. Or, to make it more like the truth, you should realize that the speaker means something very different. What he really means is this: if we let billionaires pay symbolic taxes as we do now, then balancing the budget will the impossible. If pumping asset prices will be our only goal, then paying for entitlements will be impossible. If we must keep HMO executives as happy as they are now, then solving the healthcare impasse will be impossible. And since low taxes for billionares, inflated asset prices, and happiness of HMO executives are all sacred things to the speaker, it follows that positive changes are impossible.
In other words, you can never do anything worthwhile without stepping on some toes.
I can only agree with that, but I disagree that our self-inflicted problems have no solution. For better of worse, America is a fabulously rich country that can easily find the money once it starts looking in the right places.
The available savings and the available sources of extra income are large enough to pay for all the excesses of the last two administrations, and that includes the two wars and the whole series of multi-trillion dollar bailouts. We can even stay on the current collision course for another decade and then still fix the problem when the need arises.
Just run these numbers:
A real healthcare reform can save $1 trillion a year.
A meaningful cut of needless military spending can save $300 billion a year.
An extra 1% property tax can bring in $200 billion a year
A repeal of Bush's tax cuts can bring in another $100 billion a year.
Removing the waste in the education system can easily produce another $100 billion of savings.
A 1% asset tax on stocks can generate $50 billion a year once the market is allowed to find its normal valuations.
Paying the debt can save the government another $250 billion a year in interest once the steps indicated above are taken and the time is allowed to work its magic and reduce the $12.3 trillion debt to zero.
I could continue the list of measures, but there is no reason to continue it. The conclusion is already clear. We can pay off all that astronomical debt in 7-8 years without any major trouble and with minimum sacrifices for the majority.
So when I hear that doomsday talk, I am not worried at all. It's like hearing Warren Buffett cry about his inability to pay for his diet Coke. You realize that the guy is facing a very tough emotional decision, you know that as far as he is concerned, the world is ending for him this very minute, but you also know that eventually the sweaty hand will reach into the pocket and the dollar bill will be produced and handed over to the cashier and nobody will be bankrupted and the world will continue.
This is why I am optimistic about the long term.
On the other hand, I also know that this dollar bill will not be produced until the cashier tells the customer to pay now or leave.
This is why I am pessimistic about the short term.
Finally, there is that climactic moment when tax hikes and spending cuts are already unavoidable and people still think the world is ending. That's why I am even more pessimistic about the medium term than about the short term.
But if we talk about the really long term,15-30 years from now, then it's a different story altogether. In the long term, I don't see any significant problem balancing the budget, paying for the entitlements, and even increasing them if necessary.