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Jettison Bad Habits Which Lead To Bad Public Policy

posted in: Weekly Commentary 0
By Lowell L. Kalapa
(Released on 11/23/08)

In the past few weeks, we have taken a look at some of the major challenges that lie ahead of us as a people and as elected officials. In large part the underlying cause of these problems is the same as that underpinning the recent economic meltdown nationally and globally.

What it boils down to is what is called instant gratification. A major contributing factor to the recent economic meltdown is the fact that today’s generation of consumers is not willing to work and save to acquire this or that thing. So, the more obvious examples are the horror tales of loans being made to families who didn’t have a down payment for their first house or perhaps paid interest only for the first two or three years of their mortgage. But there are also the horror stories of families who have $20,000 or perhaps as much as $50,000 of credit card debt because they had to have that special something right now, even though they had no money to pay the bill when it arrived in the mailbox.

To a large degree, the pickle that we have been discussing in the past few weeks emulates that bad behavior. Constituents have demanded more and more services and elected officials have pandered to their voters by providing those services all the while promising a reduction in taxes. That just cannot happen. Sooner or later the overburdened ship will capsize and sink under the host of services with no resources to pay for those services. Without serious mending of these ways, future policymakers will find that they will have little flexibility to address emerging and changing needs of future generations. With resources spread so thin and tied up for this or that program, government will find itself increasingly ineffective and unresponsive.

Like consumers who have incurred mounting credit card debt or a mortgage that they simply cannot afford, the rising federal deficit reduces national savings, diverts potentially productive private investment and hampers economic growth. And as noted in an earlier weekly commentary, so much of the national debt is now held by foreign countries who because they hold our debt could possibly threaten our national interests and our nation’s international standing. Interest payments on that debt thus go abroad instead of into the hands of U.S. taxpayers that in turn would feed our national economy.

Without any reforms of our nation’s entitlement programs, such as Social Security and Medicare, as well as spending and tax policies, it is estimated that by the year 2040, the federal government will spend more than twice as much as it takes in taxes. As the portion of the federal government that goes for those entitlement programs grows, resources for other federal programs, such as education and child welfare, will shrink, short-changing future generations of the skills and well-being needed for the nation to prosper and flourish.

So what can we do to change the course that our elected officials have chosen? We must demand that our elected officials face up to the problem, and make them realize that they can’t lower your taxes without also curtailing their mark propensity to spend even more. Both taxpayers and our elected officials need to rethink our priorities to focus on critical societal needs and programs and policies that work. We, as taxpayers, need to realize that the federal government, or for that matter state and county governments, cannot be expected to provide for all our wants. More importantly, if we expect government to hold the line on taxes, we cannot shift responsibilities to government that we personally are not willing to pay for in higher taxes.

We, as a nation, should recognize that it took a long time to work our way into this mess and, therefore, it will take a long time to dig our way out of it. There is no silver bullet and no easy answers to the problems. But we must also recognize that we must begin now to address the problems. Any more delay will only make matters worse. And we must also realize that while growth in the economy is essential, by no means will the economic growth get us out of this problem.

Taking benefits away from seniors or raising payroll taxes are highly and politically unpopular; however, doing nothing seals the fate of future generation. Federal officials need to re-institute tough budget controls, reform entitlement programs to constrain the growth in costs and make the system more efficient and sustainable. They must eliminate low-priority and ineffective programs, reform the federal tax system to make it simpler and fairer while generating additional revenue, and set enforceable fiscal policy goals. Then we must hold our elected officials accountable for their action or perhaps inaction. Although not easily done, this is necessary for us to move in the right direction.

Lowell L. Kalapa is the president of the Tax Foundation of Hawaii. Mr. Kalapa’s commentary is printed each week in the Maui News, West Hawaii Today, Garden Isle News, and the HawaiiReporter.com.

 

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