HICKS: Reducing deficit imperative for national prosperity

Mike Hicks
December 26, 2009
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Mike Hicks

The end of this decade is as good a time as any to reflect upon what has passed. We’ve had wars in Afghanistan, Iraq and the Horn of Africa—and, lest we forget, in New York, Pennsylvania and Virginia. We’ve had two recessions, three presidents, five Congresses and 10 Bowl Championship Series teams. Our population has risen, employment has risen, and personal income has risen. The average American family is healthier, wealthier and, ideally, wiser now than when the decade started.

However, to listen to political rhetoric today, you’d think we’ve been living in the darkest of ages. But as French author Gustave Flaubert told us, it is the “ignorance of history that causes us to slander our own times.” The facts reveal that, in terms of its length, unemployment, inflation and loss of production—the things that matter—the current recession ranks as only the third- or fourth-worst of the dozen post-World War II recessions. It hasn’t been as bad as the early 1980s, much less the Great Depression.

The end of a decade is also prime time for dwelling upon the next 10 years. A year ago, I’d have been optimistic. The buzz surrounding the new administration indicated they’d pursue a quick, but large, $220 billion stimulus bill (which I supported). Like many voters, I expected modest and rational changes to health care and environmental policy. I was mistaken.

The stimulus bill grew to almost $800 billion, which, together with the Troubled Asset Relief Program legislation, gave us the single largest one-year increase in national debt in history (by any measure). As this article goes to press, the effect of health care legislation is a mystery—not least to those who voted for it. Most estimates have it adding $1 trillion to the debt. Unlike earlier periods of high deficits, we aren’t buying anything permanent like infrastructure. This deficit is not sustainable; the spending will not help our economy grow and the legislation before Congress will only make the matter worse.

The real alarmists are wrong, though; the United States will not go bankrupt. We cannot—we own a mighty printing press. But, unless we begin to reduce our deficit, we face very difficult times. Without immediate reductions, probably no later than mid-2011, interest rates on U.S. securities (the debt the Chinese hold) will rise, and inflation will re-emerge.

Here again, the alarmists are wrong. We will not descend into spiraling double-digit inflation. The Federal Reserve will not let this happen. Officials will simply raise interest rates, too slowly at first, then vigorously. We will then enter another recession, for which we are most unready.

This doesn’t have to be, but reducing a deficit will take a once-a-century shift in politics. Tax increases, no matter how onerous or targeted, won’t be enough. Cuts to all discretionary spending won’t plug the budget hole. We will have to cut spending radically in defense, Medicaid and Medicare, aid to the poor, transportation and education. 2010 will be a pivotal year.•


Hicks is director of the Bureau of Business Research at Ball State University. His column appears weekly. He can be reached at bbr@bsu.edu.


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  1. Liberals do not understand that marriage is not about a law or a right ... it is a rite of religous faith. Liberals want "legal" recognition of their homosexual relationship ... which is OK by me ... but it will never be classified as a marriage because marriage is a relationship between a man and a woman. You can gain / obtain legal recognition / status ... but most people will not acknowledge that 2 people of the same sex are married. It's not really possible as long as marriage is defined as one man and one woman.

  2. That second phrase, "...nor make or enforce any law which shall abridge the privileges or immunitites of citizens..." is the one. If you can't understand that you lack a fundamental understanding of the Constitution and I can't help you. You're blind with prejudice.

  3. Why do you conservatives always go to the marrying father/daughter, man/animal thing? And why should I keep my sexuality to myself? I see straights kissy facing in public all the time.

  4. I just read the XIV Amendment ... I read where no State shall deprive any person of life, liberty, or property ... nor make or enforce any law which shall abridge the privileges or immunitites of citizens ... I didn't see anything in it regarding the re-definition of marriage.

  5. I worked for Community Health Network and the reason that senior leadership left is because they were not in agreement with the way the hospital was being ran, how employees were being treated, and most of all how the focus on patient care was nothing more than a poster to stand behind. Hiring these analyst to come out and tell people who have done the job for years that it is all being done wrong now...hint, hint, get rid of employees by calling it "restructuring" is a cheap and easy way out of taking ownership. Indiana is an "at-will" state, so there doesn't have to be a "reason" for dismissal of employment. I have seen former employees that went through this process lose their homes, cars, faith...it is very disturbing. The patient's as well have seen less than disireable care. It all comes full circle.