According to a recent poll by the Associated Press and CNBC, Americans prefer cutting federal services to raising taxes by a 2-1 margin.
The poll "showed widespread anxiety about budget shortfalls exceeding $1 trillion a year." Hmmm. Go figure.
At the same time, the poll showed that "there is little consensus on specific, meaningful steps — and a wariness about touching two gargantuan programs, Social Security and Medicare."
The bottom line is this ... we can't keep borrowing a trillion dollars per year. At some point in time, the interest rates that people are going to demand to keep loaning us money are going to go up. We're becoming a bad credit risk. We simply have to cut spending - broadly and deeply - if we're going to survive as a nation. Our economy is only generating roughly 70% of the revenues the federal government needs to operate each year at current tax rates and current spending levels.
Look what is going on in Europe right now. Many Americans admire European style "democratic socialism" and aspire for America to be more like European nations. Guess what? It doesn't work. The spending eventually comes home to roost.
In this morning's news, the top financial stories are all about European nations on the brink of fiscal collapse. Greece received a 110 billion Euro ($145.7 billion) bailout back in the summer and yesterday they asked for and received an extension on their repayment out to 2021. Ireland received an 85 billion Euro ($111.7 billion) bailout on Sunday. According to reports, both Portugal and Spain are on the brink of requiring a bailout, too. Other countries in the Euro zone have seen increased borrowing costs as a result, including Italy, France, and Belgium.
What makes things even scarier in this country is the fact that many states are operating deeply in the red. New York is facing a $9-$10 billion deficit in their 2011-2012 budget. California's deficit this year is $7.4 billion and their projected deficit for their next fiscal year is $19.3 billion. New Jersey faces a $2 billion deficit in their current fiscal year and a looming $11 billion deficit next year. Illinois is $13 billion in the red this year. Michigan is $1.6 billion in the red this year. Pennsylvania is $1 billion. Massachusetts deficit is over $2 billion this year.
The current spending levels simply are not sustainable. Many states are already staring down the barrel of severe austerity measures combined with sizable tax hikes. Guess what happens then? All growth stops while businesses and citizens flee, and tax revenues fall further. Some say, "vicious cycle" while others might say, "death spiral." Circling the bottom of the bowl is more like it.
We need to flush our old ways before our old ways flush us.
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