After a long workday on a cold February Tuesday, I wanted to take my mind off reality by zoning out in front of the television. Television fascinates me because of the variety it offers, yet, at the end of the evening, I typically end up entirely unsatisfied. But I always come back.
In short, for me, it is like the lunch buffet at Pizza Hut. When the nausea wears off, I go back.
Steve Jobs once said: "When you're young, you look at television and think, there's a conspiracy. The networks have conspired to dumb us down. But when you get a little older, you realize that's not true. The networks are in business to give people exactly what they want." So what did I want Tuesday? Comedy? Drama? A game? A documentary?
I found a show that combined elements of all that, and more. It was called "The State of the Union."
The premise of the show is simple. The main character, the President, speaks to a group of 600 or so people and tries to convince them to agree to his ideas on how to spend trillions of dollars, regardless of how sensible or ridiculous his ideas are. To convince some, the task should be easy, because they appear to be his sycophants. To make things easier, they are trained to clap and holler when the older gent sitting behind the President smiles and stands up.
For others, the task is more challenging, because if they do agree, the tanned gent sitting behind the President glowers at them with disapproval. That can be very disconcerting. The best part of this show - no commercials! Well, not commercials as we know them. I did notice a product placement for bottled water during the post speech part of the show when one audience member gets to try to convince the rest of the audience that the President was off base with his ideas.
At the end of the evening, I felt my familiar television post-viewing feeling of being unsatisfied. I also felt my frequent post-Pizza Hut feeling of being somewhat nauseated.
Oh sure, the President said a lot of stuff that was not objectionable on its face. He wants to spend more money on creating jobs, education and making the United States safer. The older gent smiled and stood up a lot during the mention of these ideas. The best part of these ideas was that it was not going to cost any extra money. The tanned guy seemed pleased with that and allowed others to express support for that notion. But the President wanted to pay for these plans with higher taxes on viewers. The tanned guy returned to his grumpy self on that suggestion.
The President also had a novel idea to raise participation in the tax program. In an effort to increase payroll tax receipts, he plans on requiring employers to pay more to certain employees. Some sort of Robin Hood once removed idea, I suppose. Out of fairness, this also means that employers would have to pay lower taxes, because their profits will be less. Yet another tax loophole for the one-percenters. (That was the comedy part of the show, if you're into that kind of humor. I am not.)
The show could have been made better if it was interactive. I wish that I could email or tweet questions directly to the podium and have the President respond. I had a lot of questions; I would have liked specifics. Exactly how much is this not going to cost me? What has changed that some of the same ideas that were proposed four years ago and didn't work were going to work now? How does the President plan to build support and work together with the same people he has labeled as inflexible obstructionists? Maybe the answers to these questions were obvious, because half of the studio audience cheered loudly without the benefit of the answers.
If I could ask just one question, it would be this: What about the debt?
The amount of debt the United States has incurred is staggering. In January, the federal government debt held by the public was at it's maximum allowed by law - $ 16.394 trillion. How much money is that? You may recall that Governor Cuomo pledged $1 billion for Buffalo paid over ten years. It was, and still is, considered a big deal which some consider unaffordable. Regardless, with $16.394 trillion, the United States could give $.5 billion to every city and town in the United States.
Now, THAT would be a good show. I suggest Oprah as the host. "Buffalo - you get a half billion! Tonawanda - you get a half billion! Sardinia - you get a half billion! Wales..." and so on 35,000 times. She would probably need a few bottles of that water that the guy responding to the President used during his speech after the State of the Union.
Given that astronomical level of debt and pushed against the ceiling, how did Congress react? It simply raised the ceiling by an unspecified amount. As a result, the debt will be 76 percent of the Gross Domestic Product (GDP) by the end of the year, the largest ratio since 1950. The difference between now and 1950 is stark. In the ten years following 1950, the debt as a percentage of the GDP shrank to around 40% by 1960. The Congressional Budget Office projects that our debt as a percentage of the GDP will remain at around 75% in ten years, even as our GDP rises.
This chronic high debt will necessarily and fundamentally change the way Americans spend money. In particular, Americans will need to learn how to save and buy, rather than borrow and buy. Why? Because money will be too expensive to borrow. By persistently borrowing billions and trillions of dollars to pay for present day expenses, the government is crowding out private borrowers, the private sector that may want to grow and add jobs. It is simple supply and demand. If the supply of money available to borrow is low and demand is high, it will cost more to borrow.
Right now, as the economy struggles to recover and grow, borrowing money is cheap. Right now, the return on a ten-year treasury note is 1.8% - very low. The CBO projects the return to rise to 5.2% by 2019, similar to the rate in 2001. By way of historical information, the average 30-year fixed mortgage in 2001 was 7.3 percent - about double what it is today. The CBO also predicts that labor income as a percentage of Gross Domestic Income to remain below that of recent decades.
In short, people will be earning a bit more in 2023 than now, but will have to pay a lot more to borrow money. People struggle to afford a mortgage now. Imagine how hard it will be when mortgages cost twice as much.
We must fix the debt problem now. We cannot continue to pass the burden to the next generation. It is simply unsustainable. This will mean paying now for some of the sins of the past, when the can was kicked to us. This will mean relearning fiscal responsibility. This will mean that we care about the future - both for ourselves and our children.
We are an aging population. How can we expect future generations to care for us when they won't be able to care for themselves? Simply, we cannot.
I was disappointed by the State of the Union show, although I heard that it was recently renewed for four years. I wanted answers, not hollow hope. It seemed like another attempt to distract me from worrying about the future. As Steve Jobs would have probably recognized, politicians are in the business of giving people exactly what they want (to hear).
Comments? Please email me at Peter.R.Livingston@gmail.com.