The American family faces a great challenge. Government spending in 2012 exceeded tax revenue by more than 50 percent. Its debt (more than $16 trillion), which will be passed along to its children and grandchildren, amounts to more than one year's gross domestic product.
The left-of-center family members want to increase tax revenue, but not reduce spending. The right-of-center family members want to cut spending and leave tax revenue alone. Neither side seems willing to budge.
The family members need to compromise. Each side can get something they want only if they accept something they don't want. But that's what compromise means.
Making the situation worse, we don't know what our lives would be like if we accepted either or some combination of both. Uncertainty causes fear - fear of the unknown. It freezes us in place.
This dilemma might be solved by looking at the past. Let's go back, economically speaking, to 2000 and 2001.
During that period, government spending averaged $1.8 trillion. Tax revenue amounted to $2.1 trillion, or 20 percent of the gross domestic product at that time. The compromise would be that the left-of-center family members get higher taxes but have to accept lower government spending than today. The right-of-center family members get a smaller government than today but have to accept higher taxes than today.
Both left and right would have to give up some things the American family cannot afford. There would be no Iraq or Afghanistan interventions, no stimulus package, no "No Child Left Behind," no prescription drug benefit and no Obamacare.
We lived through 2000 and 2001 without these things, so we can do it again.
Taxes would have to increase, too. A tax burden of 20 percent of today's GDP is sustainable since that is what it was in 2000 and 2001.
Let's look at what the numbers might look like. If tax revenue was 20 percent of today's GDP of $15.8 trillion, it would approximate $3.2 trillion. If government spending only increased at the rate of inflation since 2000-01, it would approximate $2.4 trillion today.
In other words, we could have a budget surplus of approximately$800 billion.
What could the American family do with the surplus? How about paying off the national debt? Paying down a $16 trillion debt by $800 billion a year would retire it in 20 years.
My generation, the baby boomers, and its predecessor generation accumulated the debt by allowing the federal government to spend more than its revenue.
The $16 trillion debt is more easily appreciated when viewed another way. It amounts to $133,000 per household in the U.S. This is just federal government debt. It does not include the debt households otherwise incur for such things as: houses, automobiles, educations, etc.
Wouldn't it be nice to pass this country to our children and grandchildren without the obligation to pay for our profligacy?
The Founders would agree. Alexander Hamilton thought the ability to borrow at the national level was a blessing. It enabled the fledgling nation to finance its defense and undertake important public works. However, the debt was to be repaid.
Thomas Jefferson thought passing a debt through the generations was immoral and proposed each generation pay off federal debt over the following 20 years or so.
In this way each generation paid its own way. We can do this. We should do this.
Christopher Gable, Altoona