Surveys of public opinion indicate that consumer confidence is very low and four out of five voters think the nation is on the wrong track. President Bush gets much of the blame for the public’s pessimism. But maybe the presumptive nominees of the two major parties who are running to replace him deserve some of the blame too, because neither seems willing to face up to the parlous state of the nation’s finances. Any voter who pays attention to economic news can sense that the nation is in decline, and yet the candidates continue offering extravagant promises that would make the problems worse. Consider some trends…
1. The debt that the federal government owes lenders has increased 60% since President Bush took office, rising from $5.7 trillion in 2001 to $9.3 trillion today. Just paying the interest on this debt has cost taxpayers $380 billion since the current federal fiscal year began last October, with a growing portion of the payments going to foreign holders of U.S. debt like China. According to the White House budget office, the government will add $482 billion in new debt next year.
2. Despite all that deficit spending, the growth rate of the economy on Bush’s watch looks likely to come in well below 3% annually, tying him with his father for the lowest rate of private-sector job creation in the postwar period. Much of recent job growth has been in government or areas like healthcare that are subsidized by government. Meanwhile, 40,000 manufacturing jobs have disappeared every month of Bush’s tenure, and the nation accumulated a merchandise trade deficit of $847 billion last year — 6% of GDP, or about $100 million every hour of every day.
3. The average family’s premium for healthcare insurance has increased 80% since the beginning of the decade, to $12,000. That’s one-fifth of a median family’s annual income. Even though U.S. per capita healthcare expenditures are already twice those of other industrialized countries such as Germany and Japan, analysts say healthcare costs here will increase 10% in 2008 and another 10% in 2009. That would raise healthcare costs to 17% of GDP, with government at all levels paying nearly half of those costs.
During the same period these trends have been unfolding, the strength of the U.S. economy became increasingly dependent on the price of foreign oil, 90% of which is controlled by governments rather than private interests. Oh, and U.S. military expenditures rose to nearly half of the global total. So how do the candidates propose to deal with all these challenges? Senator Obama wants to implement universal healthcare while expanding benefits for children, the disabled and people with mental health problems. He also wants to increase investments in infrastructure, renewable energy and manufacturing. Total price-tag for his promises? No one really knows.
Senator McCain has a different approach. He wants to cut taxes to stimulate job growth. Among other things, he would extend the Bush tax cuts for all families, repeal the Alternative Minimum Tax, cut the corporate income tax rate, reduce Medicare premiums, hold down capital gains taxes, create an investment tax credit, and double the personal income tax exemption for dependents. According to the Congressional Budget Office, just the extension of the Bush tax cuts would cost the government over $200 billion in revenues each year after 2011. So McCain’s plans are just as unrealistic as Obama’s. Maybe that is one reason voters are so pessimistic about the future — they know that what the candidates are proposing isn’t just unaffordable, it would make the challenges we face even harder to solve.
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