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Facts Are Stubborn Things

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Americans are clearly unhappy with the current state of the country, but there is nothing new about American dissatisfaction with the status quo. We are an upwardly mobile society imbued with a belief that the future will always be better than the past. However, in recent years, rather than rolling up our sleeves and addressing our problems directly, we have developed an obsession with assigning blame, making excuses, and evading responsibility.

During the post-World War II period, we dealt with huge social changes in matters of race, gender, and sexual preference. We transitioned from an industrial to service-based economy, from a large unionized private work force to a small one, and from an absence of public service unions to a preponderance of them. We fought and paid for wars in Korea and Vietnam as we have more recently in the Gulf. We experienced military buildups and contractions, dealt with violent civil unrest as well as non violent protest. We carried on through two impeachment proceedings, numerous assassinations, and much acrimonious partisanship. We experienced both conservative and liberal government, fought wars on poverty and reformed welfare. We dealt with inflation and deflation, stock market bubbles and busts, and financial crisis foreign and domestic. Our tax structures fluctuated wildly -- high marginal rates, low marginal rates, progressive brackets, flatter brackets, favorable and less favorable investment income treatments. And we changed the composition of government spending as political fashion dictated.

Much of our current political conflict seems to stem from our perceptions about fiscal policy -- how much we raise in revenues and how much we spend. We tend to look at the myriad different circumstances and personalities of the past and based on our politics draw cause and effect conclusions about our current situation. But what exactly did we do in the past?

John Adams famously said, "Facts are stubborn things. And whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence." If we look at the economic facts without prejudice, we must conclude that despite all the changes in our circumstances, booms and busts, activist and conservative government, war and peace, there has been a remarkable constancy and consensus in the actual conduct of our fiscal policy -- until recently.

FEDERAL GOVERNMENT
SUMMARY OF RECEIPTS, OUTLAYS, AND DEFICITS
AS PERCENTAGE OF GDP
RECEIPTS OUTLAYS DEFICIT
50's 17.2 17.7 <0.5>
60's 17.6 18.6 <1.0>
70's 17.9 20.0 <2.1>
80's 18.3 22.2 <3.9>
90's 18.5 20.6 <2.1>
2000-08 17.9 19.4 <1.5>
***
Average 17.9 19.7 <1.8>
***
2009-12 15.4 24.4 <9.0>

From The White House Office of the Management and Budget.

Despite all the unplanned events, all the changes that we have undergone, and the different ways we chose to get there, our economic policies have had a remarkable consistency of result -- raising revenues of about 18 percent of GDP, holding spending to about 20 percent of GDP, and financing manageable deficits of roundly 2 percent annually. However, without finger pointing or assigning blame, it is evident that what we are doing now not only differs materially but is unsustainable. We have been operating without budgets and apparently without any attempt to manage toward any financial targets or limits. The result is that we are collecting less revenue and making significantly greater expenditures as a percentage of GDP that yield far greater deficits to burden future generations.

The necessary path for our future is straightforward: restore the consensus fiscal policies that served us so well in the past -- raise taxes and spend less. There is nothing unique about our present circumstances. The laws of economics have not been repealed. Every challenge we face now, we have faced in one form or another over the past sixty years. We have to get back to basics, summons the will and self-discipline to make responsible revenue and spending choices, and stop playing the blame game.

Al Checchi is chairman of Join Together America, the former chairman of Northwest Airlines, and a former candidate for Governor of California. His new book is The Change Maker.