We can’t afford more bailouts
Many people I talk to are stunned by the impact of the recent financial crisis. However, what grabbed the attention of most has been the escalating growth in the bailouts from the federal government over the past few months.
We’ve seen $30 billion given to Bear Stearns, $85 billion to AIG, $200 billion for Fannie Mae and Freddie Mac, and now $700 billion to the entire financial services industry. All told, that adds up to over $1 trillion in liability picked up by the Americans citizens.
Many taxpayers are outraged, while most individuals in New Hampshire and across the country are just shocked by the scope of the crisis, but they haven’t seen the end of it.
With all the talk of the meltdown of the credit market, many Americans missed the fact that Congress also just passed a $25 billion bill to bail out the automobile industry. Now, the manufacturing sector, the construction industry and states, led by California, are getting in line for federal taxpayer assistance.
We’re on the verge of spending our way into a hole we can’t escape.
It wasn’t always this way. When I first was elected to Congress in 1991, the nation faced a true recession that resulted in a difficult economic environment. We resisted calls to open up the federal treasury, even rejecting President Clinton’s stimulus package in 1993, which was “only” $30 billion.
I believe this frugality and confidence in allowing the American people to work their way out of challenging economic conditions sent a clear message about our principles as a nation, but more importantly, set the stage for the massive boom we saw later in the decade that led to unrivaled growth and, coupled with a fiscally sound Congress, federal budget surpluses.
However, we have recently seen a very different direction from Congress. After the rebuilding efforts in the wake of the September 11th attacks and Hurricanes Katrina and Rita — real disasters that deserved active government involvement — the mindset in Washington shifted to the idea that the federal government should be involved in any real or perceived disaster, large or small.
This way of thinking has to change quickly, or it will bankrupt our nation. The truth is that we have real fiscal troubles on our horizon and we desperately need leaders in Congress to stand up and restore fiscal responsibility and stop the wasteful spending immediately.
We’re standing on the edge of a budget chasm that we can’t dig ourselves out of.
Within 10 years, Social Security will begin to pay out more than it takes in, requiring the program to start cashing in the IOUs it has been collecting to finance borrowing for federal spending. According to the Social Security and Medicare Trustees report, future obligations for just the Medicare Part D benefit alone exceed the unfunded obligations for Social Security.
And starting in 2010, Medicare Part A will begin paying out more than it takes in and the trust fund will be completely depleted by 2019.
When I served in the House, I led a program called the ‘A to Z’ plan to cut federal spending. We need a similar effort now, but we need to go further if we’re going to avoid a fiscal disaster that will saddle our future generations with massive tax increases. We need a wholesale restructuring if we are to get the federal government’s spending in order.
Before we can do that, though, we must make clear that we cannot bail out every industry that hits a bump in the road. Tough times are coming and we need to prepare. There is no room for failure.
Former Congressman Bill Zeliff served in the U.S. House of Representatives from 1991 to 1997.