On the Fiscal Cliff and the Long Term

So far there is no resolution to the fiscal cliff. Perhaps we will go over it. In the long run, I don't think it much matters if we do or not. If we go over, I am sure that there will be legislation proposed to cut taxes on all except the top 2 percent. I posted several days ago about an article in the St. Louis Fed Review about the increase in the deficit since the early 1970s.  We have also known since before then that the "Baby Boom" generation was a phenomenon that impacted things when they hit certain ages--the need to build more schools when boomers reached school age, expansion of colleges and universities when boomers hit college age, more houses as boomers began family formation, and so on. In  the same way, we have known that boomers would impact social security and medicare when they hit retirement age.

If we look at voting in this country since the early 1970s, we can say that the people have wanted more from the government but have not wanted to pay for all of it.  Whenever any politician has broached the subject of social security or medicare reform, he or she has been slapped down by voters. Social security taxes do not go into funds set aside for the persons, but are used to pay social security benefits of current retirees. Instead of having boomers pay more on the grounds that they ultimately will collect more, we end up forcing younger generations to bear more of the burden. The alternative is to reduce benefits to some extent. The debt levels will not fall significantly by only making cuts in discretionary spending unless taxes rise substantially.

The fiscal cliff provided an opportunity for serious thought and discussion about the long term if that discussion had begun early in 2012. There is not enough time between Christmas and New Years for such a conversation to occur. The track record of the Congresses and the presidents we have had is settle for short-term patches and not to tackle the longer term issues such as the unsustainability of the entitlement programs as they exist today. But, I have come to realize that the Congresses and presidents we have had merely provided what the electorate wants.  We want more but we don't want to pay for it.  But who do we get the "more" from?  Many years ago my father suggested that a law should be passed that said that any future laws had to substitute the term "taxpayers" for government, as in "the taxpayers will provide the funds for defense, or for building highways, or for medicaid payments." I don't know if it would make a difference but it might be worth a try.