A plan to save the American dream — does it come too late?

In an economy where tax revenues will soon be entirely swallowed up by entitlements, it may be too late to save the American dream

May 12, 2011|By Ron Smith

Uncharacteristically, I want to begin this column with some good news on the economic front, though it will be brief: Across the country, state tax revenues are rising substantially, indicating there is a real recovery going on. For the spendthrift federal government, tax receipts rose by $110 billion, or 9.1 percent, in the first seven months of fiscal 2011.

In telling us this, The Wall Street Journal says the bad news is that the federal deficit increased a record $871 billion, a $71 billion dollar bump, because spending went up $181 billion, or 6.4 percent.

For the CEOs of our bigger companies, life is sweetened by an average increase in compensation of 11 percent last year. Let us revel in the rewards crony capitalism bestows on those who sit atop the heap. After all, they earned them. (OK, not really. They actually purchased them from their political servants.)

Paul B. Farrell of MarketWatch explains: "The Super Rich have always had some hand in America's destiny, operating from the shadows. Today, this conspiracy of Wall Street, corporate CEOs, politicians and Forbes 400 billionaires operates openly, with absolute power and an arrogance that is corrupting the nation's soul, their souls, your soul. This conspiracy has no moral compass, yet ironically, is legal."

Money talks, BS walks, goes the old Texas poker saying. Money buys laws favorable to those who have it. A little more than 20 years ago, we had the S&L scandal, and the authorities moved efficiently against the scamsters who caused it. Quite a few went to prison, including Jeffrey Levitt of Pikesville, who served several years in federal prison for his misdeeds as chairman of Old Court Savings and Loan.

Fast forward to the well-documented role of Wall Street big shots in the collapse of the world credit system and note that aside from Bernie Madoff, not one of them has been arrested, perp-walked, convicted and jailed for their wrongdoings.

Why? Because they have highly paid lobbyists, tens of thousands of them, brokering their interests in a business so lucrative that K Street lobbyists alone last year were paid $3.6 billion. And it's money well spent by their clients.

What used to be clearly illegal is now legal due to the repeal of regulations like the Glass-Steagall Act, which prohibited commercial banks from collaborating with full-service brokerage firms or participating in investment bank activities.

Lobbyists also secure for their clients special regulations, exemptions, loans, tax loopholes, earmarks, access, agency appointments, defense contracts, etc.

As you certainly know by now, overhanging all of this is out-of-control government spending. The federal government borrows 43 cents of every dollar it spends. State governments are faced with pension and health care benefits for public-service workers that will exceed their ability to pay a short way down the road.

The above-mentioned Mr. Farrell says we are past the point of no return and that doomsday looms. Evidence abounds that he might be right, but others say what is broken is fixable if we act quickly and decisively.

The Heritage Foundation has published a paper titled "Saving the American Dream," which outlines a number of things its authors say could fix the debt, cut spending and restore prosperity.

I talked with Alison Acosta Fraser, one of the authors, this week. She explained how the plan would save the day by cutting government down to size, re-energizing American enterprise through fundamental tax reform, and transforming entitlement programs to provide real economic security without passing a crushing financial burden on to younger generations.

Without significant reforms, entitlements will consume all tax revenues very soon. Herein lies the problem. Even those Americans rightly concerned about our fiscal plight object when "reform" means taking away some of their own benefits.

So even though every individual citizen under 55 is currently in hock to the tune of $200,000 as his or her share of the national debt, Social Security, Medicare and Medicaid still represent the third rail in American politics.

This makes it unlikely that any rational, coordinated plan to save the American dream will be undertaken before catastrophic circumstances wash over us in a kind of fiscal tsunami.

If this observation is doom-saying, I plead guilty as charged.

Ron Smith's column appears Fridays in The Baltimore Sun. His email is rsmith@wbal.com.

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