The moment is at hand. Our national debt is at record levels. Our self imposed debt ceiling is looming just weeks ahead. Our Congress and president are simply nibbling at the edges of the basic problems.
About 15 percent of our national budget funds things other than defense and the big four entitlement programs. There is no way that meaningful deficit reduction can be found in that 15 percent without massive, destructive changes to our society.
Therefore, unless we can find a way to address some reductions in entitlements and defense, we are doomed to live with the consequences of higher debt... and probably sooner than we'd like to admit. We could be confronted with the draconian effects of severe currency adjustments imposed on us by global bond markets as early as this spring if we fail to increase the debt ceiling requirements. This could spark serious fear in global financial markets that would make recent events in Europe and Greece look like someone a quarter short on their venti latte.
So what on earth can we do? The president's debt commission came up with several good and useful ideas to attack the longer term. So far, none of them have seen the light of day in the current political debate. One of those ideas is really smart, would work and is in many practical ways already occurring in society at large: to increase the retirement age for Social Security to 68, beginning in three years. But in the shorter term, there are no ideas out there about how to reduce the costs of entitlements without simply cutting various benefits across the board -- an approach generally seen as a political impossibility.
This is where some inventiveness might yield some serious benefits.
A starting proposition is that there is more resilience and flexibility among the population at large than is generally recognized or admitted. When it comes to benefits that the government makes to citizen beneficiaries, it is very rare that people voluntarily advertise that they can cope with anything less than they are due. Poll after poll says everyone is living on the edge. Yet as we come off the 2008 flirtation with depression it becomes ever clearer that our population is very resourceful.
We also know that when the dentist says "this won't take much longer," most people can stand the pain a bit longer and come out better for it. So the core of a new idea to address the entitlements benefits might be to make a few short-lived reductions on a rotating basis throughout the population to spread the pain BUT also obtain enough reductions to gain some earlier deficit shrink and ease the overall problem.
For example, and only for illustrative use, Social Security monthly payments over $1,000 could be scaled back by 10 percent for three months per recipient, rolling through the whole relevant population in four groups a year for two years. That way the "pain" is brief and temporary and spread out to avoid too much overall loss of income to the economy at large. Of course, all such ideas have to be carefully vetted for how much aggregate savings could be obtained, how the cuts would affect the beneficiaries and provide a safety valve for hardship cases.
When small reductions are spread over a large enough group of citizens, which people believe will be restored in short order, the numbers can climb fast. Such a process would require a lot of inspired probing and experimenting and just might find a public that would prefer a short term temporary approach to sharing pain to the longer lasting systemic problems that might be forced on us by global bond markets.
We have a lot of very smart people in Washington who can understand this idea, who have access to enough data to see what could work and what savings are possible and who with the right sponsorship just might come up with a plan that could work.
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