Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.

USA, Inc.

Michael J. Gerson


October 21, 2011
by Michael J. Gerson

This is a transcript of a radio address broadcast on KDCR radio in Sioux Center, Iowa.

We are entering a presidential campaign in which the economy and the budget are the main topics—but the political discussion remains vague, incomplete and even deceptive. 

President Obama argues for the wealthiest one percent to pay more in taxes.  Some Republicans candidates, at their recent debate, called for drastic cuts in foreign assistance—which represents less than one percent of the federal budget.  Both sides leave the impression that our budget problems would be addressed if only a few took more of the burden. 

It isn’t true.  To understand why, I’d strongly recommend looking at a hefty report by analyst Mary Meeker called USA, Inc.  Meeker examines the federal budget as though it were a business—setting out all its assets and liabilities.  Her conclusions are stark.  America’s cash flow is “deep in the red” and its “net worth is negative and deteriorating.”  The federal government’s public debt is now over half the economy.

The main reason for this trend, she argues, is the growth in entitlement expenses—programs like Medicare, Medicaid and Social Security.  Since 1970, the cost of entitlements has grown 5.5 times faster than the American economy. Much of this increase is driven by health cost inflation and an aging population. 

The problem will not be solved by spending cuts on things like foreign assistance, education or even defense. The report states: “By 2025, entitlements plus net interest payments will absorb all—yes all, of USA Inc.’s revenue.”  Put bluntly: If America doesn’t address unsustainable entitlement commitments, in less than 15 years there will be nothing left over to spend on defense, education, housing, poverty, infrastructure, foreign aid or research and development. 

And the problem won’t be solved by taxes alone—and certainly not by taxes on the top 1 percent.  The report says: “Covering the 2010 budget by taxes alone would mean doubling individual income tax rates across the board, to roughly 26 to 30 percent of gross income, we estimate.  Such major tax increases would ultimately be self-defeating if they reduce private income and consumption.” 

Some discretionary spending cuts and some tax increases may well be helpful and needed.  But the conclusion of this report is clear: “Even though USA Inc. can print money and raise taxes, USA Inc. cannot sustain its financial imbalance indefinitely—especially as the Baby Boomer generation nears retirement age.  New debt levels are approach warning levels.” And the only real solutions involve changing the “levels and conditions for Social Security and Medicare benefits” and altering the “eligibility and benefit levels for Medicaid.” 

This is some of the hardest work in American politics—controversial, thankless and unpopular.  But it is also necessary.  And it would be helpful if Democratic or Republican leaders started talking about it instead of avoiding it.             

—Michael J. Gerson is nationally syndicated columnist who appears twice weekly in The Washington Post and is the author of Heroic Conservatism (2007) and the co-author of City of Man: Religion and Politics in a New Era (2010).  


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Capital Commentary is a weekly current-affairs publication of the Center for Public Justice. Published since 1996, it is written to encourage the pursuit of justice. Commentaries do not necessarily represent an official position of the Center for Public Justice but are intended to help advance discussion. Articles, with attribution, may be republished according to our publishing guidelines.”