I've been thinking about the great government shutdown of 2013. Somebody asked me what I thought about it and I replied "it's a good start." Upon reflection I've changed my mind about that.
Don't worry, this leopard didn't change his spots. I still believe government spending at all levels is out of control and should be reduced. However, with our current shutdown the solution of just shutting down is a non-responsive solution because it doesn't address the underlying problems that created the deficits. In this instance those factors are Social Security, Medicare and Medicaid.
In a sense, all of the fervor over Syria, Arab Spring, Iran, Russia, Obamacare and immigration are just smoke-screens for the the real problems in the funding and delivery of our country's three core social programs.
I've been writing for four years that the present structure of this triad is unsustainable economically and too hot to handle by Congress. The structure of these programs is causing most of the deficit/national debt problem.
Some politicians say just raise taxes. That solution is the same as just continuing to add oil when your automobile needs rings and a valve job. All you do is postpone the inevitable. The only good thing about adding oil is that maybe you can trade in the automobile and the problems will become someone else's concern. The same is not true of the social programs. They will stay with us, our children and our grandchildren.
It seems that if don't address Social Security, Medicare and Medicaid soon after an election, then before too long the next election is arriving, and legislators don't want to get involved.
We can close down our national parks and memorials as a short term solution but we lack the fortitude in Washington to tackle the basic problem impacting the national debt. Suspend tours of the White House and shutter the Lincoln Memorial in a public display of austerity, but fail to address a long-term fix to the national debt. Shame on all you who authorized you and your staffs subsidies for Affordable Health Care Act costs, then closed our national parks and heritage centers.
Let's go back to the social triad. The fix is known to all of us as there only three possibilities of addressing it: Pay more now, receive less later, or wait longer with fewer people covered.
To me, the easiest solution is to raise the age limits for receiving Social Security benefits. My reasoning is based on the fact life expectancies have been rising throughout the last five or six decades and can probably be expected to continue to extend in the future. If we have longer working careers, then the corpus in the non-existent Social Security Trust Fund (it does exist on paper) will begin to expand. In this way there doesn't have to be changes in benefits that are now in place. The same is true for Medicare and Medicaid - just hold back the enrollment period a slight bit in order to guarantee cash flow.
Economically this is a simple solution but politically it's viewed as suicide. Fixing these three important systems is critical to our country's economy. If we cannot reduce the deficits and control the national debt, then we cannot use fiscal policy as a tool to regain growth in the economy.
Remember, monetary policy is mostly about interest rates as manipulated by the Federal Reserve Board, but fiscal policy is all about taxes - which can be changed by Congress. The legislative branch can't use fiscal policy in a time of huge deficits ($7 trillion of $17 trillion in the last five years alone) so that leaves only the less effective monetary policy for us to try to get growth restarted.
It's a deep mess, but it's an easy fix.