No one wants to be Debbie Downer, but someone on the national stage needs to step up for financial sustainability. Our national debt exceeds $22 trillion, over a trillion dollars more than our annual gross domestic product. The average debt for Americans starting out in life is $67,000, and debt exceeds $130,000 during peak earning years before falling off again.
Why is no one scared out of their wits about all of this? Instead, politicians promise so many “free” goodies, you’d think we were swimming in gold instead of debt. Everyone wants to be like Oprah, giving away cars.
{mosads}When someone promises “free” anything, run the other way — particularly if you have a lifetime of trying to make a living ahead of you. There is no such thing as “free” in this life. “Free” just means that you are not opening your wallet at the exact same time you are getting something. “Free” usually means you are going to pay a lot more later than if you were paying today.
As the father of one daughter about to enter college and another one looking, I wish “free” were true. I believe education is vital for individual and future success. If we’re lucky, and the girls go to an in-state public college, the average cost per year will be over $25,000. The average out-of-state cost for a public college is over $40,000. And private college? Almost $51,000 per year. That’s not a typo.
Behavioral economists such as Dan Ariely say that “free” is incredibly seductive — it short-circuits our judgment. Personally, as I look at the bills ahead, I want to believe it so badly. But suppose we were to ask taxpayers to pick up tuition costs for the 19.9 million students who currently attend higher education institutions. The costs would balloon. Once graduated from her “free” college experience, my daughter would be picking up a crippling tax burden for the rest of her life. We can’t do this to our kids in good conscience.
One of my favorite former bosses used to ask, “What’s the definition of sustainability?” He was having fun, but it’s true — sustainability can have a lot of different meanings. At its essence, sustainability is about thinking long term. You can’t have environmental sustainability without financial sustainability, and you can’t have financial sustainability without political sustainability, and you can’t have political sustainability if you have demagoguery. Basically, society will fail at the weakest link.
Every immigrant to the United States from Venezuela, Peru, Bolivia, Ecuador and Argentina will tell you the same thing. In Peru, the demagogues got elected by promising free toasters. In Argentina, they promised free televisions. Then they killed their countries with runaway spending. When I visited Bolivia for a high school soccer tournament, I remember paying for a Coke at a convenience store with a bag of pesos. You see, the demagogues had promised so much free stuff, and created such a draconian tax system, that no one paid taxes anymore and the country was reduced to printing pesos.
{mossecondads}High taxes led to the Boston Tea Party. But you haven’t seen social violence until you’ve seen hyperinflation. The woman in Bolivia who took my bag of pesos didn’t even count them; she weighed them and then threw the paper bag into the corner with the other paper bags of pesos. It’s one reason Venezuela is in such a desperate situation: When a roll of toilet paper costs 2.6 million bolivars, you know the people have nothing left to lose. For all of the free stuff they were promised, the Venezuelans ultimately have been given bankruptcy, poverty and famine. That’s not development, that’s a disaster.
Financial sustainability has not been a top priority of either American political party. Four of the top five biggest deficit spenders in history have been Republicans, but then President Obama came along, adding more debt than any other president. The opposite of sustainability is not conservatism or liberalism. The opposite of sustainability and long-term thinking is unsustainability and shortsightedness.
What the demagogues don’t realize is that they are acting against their future interests. Big government is not the same thing as strong government. Entitlements don’t lead to better roads or drinking water. They don’t lead to space programs or better weather forecasts. Entitlements don’t help governments make markets or regulate them. Once they are passed, entitlements don’t help politicians demonstrate leadership or solve problems. They usually compound problems for the future.
Once you add an entitlement, your future freedom of action becomes constrained. Every dollar of debt added for a current expenditure is a future payment without a future return. Entitlements and interest already account for more than 60 percent of the federal budget. It boggles the mind that some people want to add more. Every entitlement dollar is the present robbing from the future.
In the 18th century, before the United States was even a country, a Scottish professor named Alexander Fraser Tytler made this gloomy prediction:
“A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.”
So where are the grown-ups to prove Tytler wrong? Who is willing to call for sacrifice, as John F. Kennedy once did? Who is willing to touch the “third rail of politics” and rein in existing entitlements, rather than grow them?
We haven’t seen this leader yet. He or she probably will emerge from the under-30 generation, because they won’t be able to take it. They don’t deserve our spending their future capital for our present needs. If we keep this up, they will hate us. And who could blame them?
Stephen Jordan is CEO of the Institute for Sustainable Development. He works on community development and disaster recovery challenges in the United States and overseas. Follow him on Twitter @scjordan.