Budgets are ultimately moral documents. They establish our priorities and reveal our values.
Despite a brief flirtation with fiscal responsibility in the 1990s, for most of the past several decades our government’s economic actions have been marked by pious words and profligate spending. It’s been a succession of free lunches paid for by passing the buck on to the next generation. But the bill is coming.
The baby boomers begin to turn 60 this year, as President Bush pointed out in this week’s state of the union address, acknowledging the “me-first” attitude of his generation by saying it is “more than a personal crisis. It is a national challenge.”
The financial pressures of an aging population on our society have only just begun and already once-proud companies like General Motors have been brought to their knees as a result of generous labor deals cut decades ago. Rising private sector pension and health care costs will have a devastating domino effect on the budgets of surrounding local and state governments of Detroit and Michigan.
This is not just a Rust Belt problem. By the year 2030, Social Security, Medicaid, and Medicare costs will take up 60% of the U.S. federal budget. That doesn’t leave a lot for actually running and protecting the country – those little things that the government was actually formed to do in the first place.
That’s why Mayor Bloomberg’s farsighted budget for New York City deserves not only local applause but national recognition. Blessed with an unexpected $3.3 billion budget surplus courtesy of Wall Street profits and the real estate boom, on top of the $52 billion annual budget, the recently re-elected businessman mayor chose to spend his newfound political and actual capital to pay down the city’s debt and address the rising fixed costs of long-done labor deals and spiraling entitlements.
On Tuesday, Mr. Bloomberg proposed spending $500 million to pay down the city’s long-term debt, while using a billion to pay for capital projects upfront instead of borrowing and saddling future mayors with financing costs. He also set aside $2 billion to establish a fund for municipal retirees’ health care – already a $1 billion annual expense to the city. And that’s not the only cost that will exponentially increase as the baby boomers are digested: New York City’s pension costs have already spiked to more than $10 billion, double the amount spent just five years ago.
Dealing with the underlying issues that constantly threaten to bring the nation’s largest city to the brink of bankruptcy appears a thankless task – it is not as cool as cutting crime or as emotionally satisfying as promising to be the education mayor. That is precisely why Mayor Bloomberg deserves widespread thanks for choosing to take on this necessary effort. It may just be a businessman’s common sense, but this is one badge of honor that should help define his political legacy for future occupants of the office.
Of course there will always be critics, ideological ostriches who prefer to bury their head in the sand than adjust their opinion based on the facts on the ground. In the case of New York, the City Council inevitably complained about the lost opportunity for more education spending, willfully ignoring the additional $70 million the mayor proposed for charter and special education schools. But even those who hope for a Mother Teresa approach from the government must realize that it can’t help anyone unless it is solvent.
Mayor Bloomberg’s focus on the ultimate bottom line seems sadly absent from the national debate. When President Bush essentially conceded defeat on his intended second term effort to reform Social Security in his State of the Union address, the Democratic side of the aisle burst into applause, prompting the president to slip into schoolmarm mode, wagging his finger at Congress while delivering his reminder that “the rising cost of entitlements is a problem that is not going away.”
Suggesting another approach, the president proposed a bipartisan committee to examine the impact of baby boom retirements on Social Security, Medicare, and Medicaid. Whether Republicans and Democrats in Congress can actually get together to work on a common problem anymore is another matter.
Ironically, fiscal responsibility has become a bipartisan value. According to the new Pew Research Center Report on emerging national priorities for 2006, the stereotype of Democrats being in favor of free-spending budget deficits has fallen away. In fact, now more than 62% of Democrats rate reducing the budget deficit a national priority, compared to the 45% of Republicans who said the same – a near reversal of the poll numbers from 1997. At the same time, self-described conservative Republicans appear to have stopped being fiscally conservative – just 36% of them rate reducing the deficit as a national priority. That said, this poll presents hopeful new evidence that the Democratic electorate’s change of heart combined with historic Republican belief in the virtue of fiscal responsibility could lead to a more far-sighted national fiscal policy.
The aging of the baby boomers is a problem that could have been predicted six decades ago. Delay in dealing with it has made funds scarcer during a war on terror and a massive rebuilding of the Gulf Region. Political leaders could do worse than take a cue from Mayor Bloomberg and embrace not just the rhetoric but the reality of fiscal responsibility. It may not be an obvious heroic posture for an elected figure, but it is moral as well as practical politics – because it is rooted in a sense of generational responsibility. And that is the standard by which all government action should be judged.