I'm reading through the works of Gene Sperling, and he keeps talking about providing incentives for lower income workers to save, either through a Universal 401K, or tax code changes, or whatever. It all sounds great, but it's missing an important element.
We can't, through changes in law, require individual savings. It's not that we couldn't pass a law requiring people to save some money, it's just that a law like that would cause a lot of ugly political consequences. Who wants to be the candidate for reelection who says "I voted for the bill that took 10% of your money away from you."
That doesn't work, and there's a better way.
While we can't have direct effect on the behavior of individuals, we can pass laws that affect how our government works. There has been a Balanced Budget Amendment introduced in Congress for years, if not decades. It's an idea that makes sense, and the last several years of the Clinton Administration shows what a budget written in balance can do. We were on track not just to pay down the National Debt, currently 8.9 Trillion Dollars, but to pay it off. This is a debt that exploded under Reagan and Bush I, and Bush II has reversed the positive direction that we had started to move.
So, why is a balanced budget so important? Because we owe money to other countries, and we have to pay interest on that money every year, regardless of anything else. Add that interest to the fixed expenses of Social Security, Medicare, and all the other promises that the Government has made, and we're heading towards a downward spiral that we won't be able to get out of.
Here's my spin. I don't think Balanced Budgets are the answer. They're not enough. We didn't pay down the Debt under Clinton by having Balanced Budgets, we paid it down by having a Budget Surplus. That's the key.
If we could require a 1-10% budget surplus at the Federal level every year, we would be able to start to pay down the debt that we have, and after a few years (or decades since we're so far in the hole), we would start having extra money. Before people start crying for tax cuts, I have a different idea. Wouldn't it be better to put that money to use in our overall economy?
Here's an even larger picture. If every level of government, from Federal down through States, Counties and Cities, were required to have a 1-10% budget surplus, all of them could start to pay down their debts and start putting money aside. For my own city of Seattle, the extra revenue could be put into local banks, and made available to businesses and home buyers as low interest and fixed rate loans. The interest earned from those loans would be made available to the city in the next budget cycle as part of the general fund, and
that extra money would justify a reduction in taxes.
There are 50 states. Washington has 39 counties. Each county has several dozen cities. We're talking big bucks, and it's time we started using that money to help ourselves and rebuild our infrastructure. Building our civilization on a foundation of Debt is destroying us a little at a time. Building on a foundation of wealth has long term positive consequences for us and our children's future. I think it's a better course.
