The IMF’s new Fiscal Monitor says “The United States will require significant deficit cuts in 2012 and 2013 to meet their commitments over the next few years. A downpayment in the form of deficit reduction this year would ease the burden in future years.” In other words, it is time that America end its habit of kicking the can down the road in fiscal matters.
The IMF has no advice about how the Congress and the Administration can end the deadlock over whether taxes should be raised on the rich and which federal programs should be shuttered or cut back. The agency is late to join the chorus about the troubling size of the US deficit and the country’s debt burden.
The IMF comments are a reminder that the capital markets may lose their interest in Treasury paper, at least at current yields. Some projections claim that the annual debt service the US will pay in ten years will be nearly $1 trillion.
The real problem is not Congress; it is the voters. They have put no pressure on Congress or the Administration to cut spending or increase taxes. The opposite is true. Most citizens want taxes low and federal benefits, particularly the ones that help them, to be maintained.
At the core of the problem about the deficit is the assumption among citizens that their personal finances should not be hurt in the name of a slowing of the increase in American debt. Those desires may be satisfied for the next several years, as the Treasury finds that it can raise more money, but they are self-centered over the longer term. Whatever sacrifices need to be made will not be made by people between 30 and 70. There in nothing in it for them.
Most Americans blame their elected officials for the country’s financial mess. Politicians will not change, whether it is Republicans who want austerity or Democrats who want social and stimulus expenditures to continue. Voters don’t give a damn about policy. They only care about what affects them. That means elected officials will push program cuts and higher taxes only so far.
Douglas A. McIntyre