Does 2008 Hold Any Hope?

Happy 2008! It is finally here- a new year, a new start. We all let out a huge collective sigh of relief that 2007 is finally over. We have just been through an unsatisfactory year for solving most of our national problems. But is there any reason to believe that the new year will be any different, especially a lame duck year for many of our government offices? What can we realistically expect? Read Robert Freer's perspective on what was accomplished in 2007 and what needs to be accomplished this year.

By Robert E. Freer, Jr., President of The Free Enterprise Foundation

“The State of being resolved, settled, or determined; firmness; steadiness; constancy; determination.”

Is it any wonder that our annual resolve of December’s glow turns into the disappointment of January’s ice and snow? Webster’s has no less than 8 expansive definitions of the word “resolution” stretching from,”… the act…or process of resolving… to the state of being relaxed.” Or, how about the act of resolving as in an equation or the breaking of a fever? The one I really like best is “The passing of a dissonant into a consonant chord by the rising or falling of a force V motion” We are doomed from the start to falling short, yet there is hope in the process, and inch by inch we do progress.

I will admit that I must grasp each little sprig of progress in our national affairs as an indication that progress is being achieved. I celebrate each inch as hope my musings are having some positive impact. I am encouraged that in the national presidential campaign, it no longer is a sin worthy of shunning to wish someone Merry Christmas and to celebrate one’s faith openly.

Considering the “PCness” of the past half century, that is a big change. I believe it comes with a recognition that the social changes of the past half century have to an unusual degree moved us much closer to a truly color blind society in which not only racial, but also religious, and gender prejudice have been removed as impediments to civil progress by all our citizens. As indicated in my last column, there is much more in our religious faiths to unite us than divide.

Regrettably that is a slender thread to build any sense for hope. A review of the past year’s columns reveals far more to be done in 2008 than accomplished in 2007. As terrorism subsides and with it death and destruction are greatly reduced, Iraq does appear headed to a much diminished hold on the public’s consciousness. 2008 is almost certainly going to see a major troop reduction as we have predicted and a clear change in mission for those who remain. But there is less to congratulate ourselves for in other areas.

We have just passed a major energy bill which accentuates efficiency, and for that we should be happy, but the political deals include an emphasis on cellulosic fuels that will divert a significant portion of our corn to an inefficient use as a fuel additive while adversely affecting our food export programs and corn prices in the U.S. The BTU cost in fuel creation must be net positive to make such programs worthwhile. It is great that the mpg fleet standard has been raised to 35mpg, but it would have been far preferable to make it 2015 rather than 2020. If it had been 2015, it would have brought more attention to hydrogen fuel cells and true environmental benefit than was achieved.

There needs to be as well a greater emphasis on all of our domestic sources of energy, coal included on an expedited basis to secure our energy independence. With current technology, coal can be produced in a fashion that is compatible with our responsibilities to the planet. Wind, wave, solar as well, at the margins can be helpful, but coal and nuclear are what we have to emphasize over the next twenty years in order to get us free from foreign oil dependence that is hanging like the sword of Damocles over our energy lifeline.

We wrote of our entitlements programs last year as well and have made zero progress in 2007. Social Security can be solved. . It was never intended as anything other than a supplemental income system. Reality today is that it is much more, and for those nearing retirement, it must be fixed to assure its sustainability. For those just entering the workforce and looking at retirement 50 years away, I don’t believe that is so. They have a lifetime to plan and work. I say 50 years because it is increasingly clear those expectations that older Americans are going to take their watch and retirement at 62 or even 65 and enjoy their golden years are badly flawed.

If we readjusted our actuarial expectations for Social Security to those when the program was created, workers wouldn’t be eligible until 75. I wouldn’t propose we do that that, but how about requiring those 25 or younger in 2007 to wait until they are 72? For those 35 or less, we could add a year from age 62 for each year as a transitional strategy to ease the program into place for those who still have an almost 40 years before expected retirement. As a final suggestion I would add that while it is fine to index the ceiling for taxation of earnings for social security benefits, I would not materially raise the cap so that it remains but one part of the younger workers’ package of retirement benefits.

As I wrote last spring, health care is far more daunting. According to The Congressional Budget Office, if you assume that that the growth of health care costs does not abate, Medicare and Medicaid will grow by nearly five times as a share of the economy by 2050. They will absorb as much of our economy themselves by 2040 as our entire budget does today. Those figures are for our health care related entitlements only and don’t include social security which, while not as bleak, is pretty bad. Current predictions are that outgo will exceed income around 2017, and the system will be unable, unassisted by general tax revenues to pay full benefits in 2041.

Even under the sunniest of assumptions, government’s share of national expenditures (GNP) within the next 25 years would have to exceed 30 percent to meet its entitlement burden, thus threatening national growth and employment. Increasingly business would be working to meet the government’s obligations rather than building for its future and that of its employees.

Deficit spending won’t work. The demographic changes are permanent and thus as debt grows exponentially, it will threaten our viability as a functioning state. Even now we have seen the percentage of the national debt in the hands of the public grow to 37% and will grow to 46% under a best case assumption by The Congressional Budget Office. The real bad news is that an increasing portion of that debt is foreign owned. Japan holds over 700 billion dollars in our public paper, and China has over a trillion dollars of combined foreign and private sector debt.

We also are not saving. Our national rate of savings has steadily decreased since the early 90s and is now a negative figure and when combined with our government’s behavior, we present a picture of a nation consuming itself like there is no tomorrow.

What will work is a universal program based on private sector provided insurance on a broad community standard that requires all to be included in the rate base. Programs that allow cherry picking of those who are the best risks doom any attempt to return sanity to our health care entitlement programs.

Last year we provided suggested solutions to our undocumented aliens mess, and have gotten the point that any program that doesn’t fix the border first is going no where. Those who insist on this requirement, need to accept that the 12 millions now here aren’t going anywhere either. Programs that require a return to their originating country for processing, need to carefully coordinate with those countries if such a requirement isn’t to descend into another bureaucratic nightmare.

We also wrote regarding tax reform and perhaps Governor Huckabee’s Fair Tax is the answer, but I would rather enact Forbes’ Flat tax with a significant 0 bracket. Our National pundits insist that not much on any of these will be tackled in 2008 and must await a new president and a new Congress. I will keep writing, and hope you keep reading. Meantime my major resolution for 2008 is to lose 15 pounds and join the MUSC health maintenance program to keep fit for the challenges ahead. May all of you have a Great 2008.

Copyright © 2007 by Robert E. Freer, Jr. All rights reserved

About the author: Robert E. Freer, Jr. is President of The Free Enterprise Foundation. He is a Visiting Professor, at The Citadel and elected in 2005 to be their first John S. Grinalds Leader in Residence. A regular contributor to the Mercury, He can be reached by E-mail at The Citadel . Copies of his earlier columns can be found The Free Enterprise Foundation.

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