Setting Limits on the New President

I don’t envy the next president, whomever he may be. His job will be to administer a government of limitations and dreams deferred, thanks to the financial crisis that has washed over our country like a tsunami.

The evolving plan of the government to buy up the “toxic” real estate investments and holdings of the banking community is not a cure for the credit crisis. It is more like emergency surgery –a radical mastectomy that must be done that removes the palpable cancer --that also disfigures the patient without guaranteeing permanent remission.

The cost will fall somewhere between $700 billion and $1 trillion dollars –as if we bought an extra army, navy, air force, marines and coast guard –twice! My poor math works it out to be $3,322 more or less for every human being in the country.

How we are going to come up with the money and what we will have to give up to do so will be the big issues for the next president. He will be in the same spot that you or I would be in if we had living expenses of $3,000 per month and a net income of $2,900. A budget like that does not leave any room for anything but survival –and hard choices. Food, water, rent and electricity make the cut. Your cell phone does not. Neither does Internet access, movie tickets, cable TV or owning a car if a bus line is handy.

In terms of running a country, we will have to decide what is essential –what we need to live-- and how we hope to pay for it. Should the government invest billions in alternative energy or should private industry? What about global warming? What about our proverbial crumbling infrastructure? How much of a defense establishment do we need? What about health care for the uninsured?

I infer nothing by way of an answer to these questions, but I do point out that they are among the issues that will be discussed. We have a lot of items on our national agenda: Some of them may be deferred and others cancelled outright.

One thing is for certain: We cannot have everything we want whenever we want it. We are going to have to set limits on ourselves and not take it out on our representatives in government when they have to say “No.”

I remain a believer in supply-side economics. A dollar that remains in the private sector is vastly more likely to generate a dollar in taxable wealth than the same dollar turned over to the government in taxes. When Kennedy lowered taxes, revenues went up. When Reagan lowered taxes, revenues went up. It even worked, though more modestly, for George W. Bush. We must raise taxes, but let us keep them affordable. Let’s not tax ourselves out of business.

Let us slash spending across the board. Assuming our budget is about $3.1 trillion for 2009, first we leave untouched $1.9 trillion. That is mandated spending for Social Security, Medicare, Medicaid, interest on the national debt (about $270 billion) and unemployment insurance.

This leaves us $1.2 trillion where we can make cuts. These programs include the Department of Defense, the War on Terror, Health and Human Services, the Dept. of Education, Veterans’ Affairs, Housing and Urban Development, the Department of State, Homeland Security, the Dept. of Energy, the Justice Department/FBI, Agriculture, NASA, Transportation, the Treasury, the Department of Labor, the Department of the Interior, the Army Corps of Engineers, the Small Business Administration, Congress, the Federal Courts, the Executive Branch, the EPA, the National Science Foundation, the National Endowment for the Arts, Public Broadcasting, and all other discretionary spending.

No cuts can be made in any of those departments without howls that “essential programs” are being sacrificed. Everyone’s ox will be gored. Everyone’s taxes will go up.

But the world will not come to an end. If there is even the least up-tick in property values or in investor confidence, the government may actually make a profit on the distressed real estate investments it is buying. And maybe…just maybe…we will have come together as a nation to solve a crisis. It’s a long shot, I admit, but worth hoping for.