Kicking the Can Off the Cliff
By don brunell
When I grew up, kids in neighborhoods gathered in a vacant lot or backyard to play “kick the can.” It was a combination of hide-n-seek, tag and capture the flag — and it was fun.
Today, “kick the can” is synonymous with elected officials kicking the tough issues down the road while racing to a press conference to blame opponents. Rather than make tough decisions, those we elect angrily point fingers.
Consider what’s happening in Illinois.
For decades, governors and state lawmakers put off dealing with problems in the state employee pension funds. Today, those funds are $96 billion in debt.
Gov. Pat Quinn (D) called pension reform his top priority in 2011 because the crisis is killing the state's credit rating and eating up money for other public services.
To launch reforms in 2011, Quinn and lawmakers jammed through a whopping 67 percent income tax increase in exchange for raising the retirement age, cutting cost-of-living increases and increasing employee contributions—all necessary to initiate essential savings.
But when the unions pushed back, lawmakers adjourned last year without passing a single reform. Two years of rancorous debate produced nothing — and they didn’t vote to give the people their taxes back.
As a consequence, the typical Illinois family saw taxes increase $1,594 a year while watching pension costs rocket upward by $17 million a day.
Matters are even worse in Washington, D.C., where our national debt increases by $3.8 billion each day. Another major battle is looming in March when Congress must vote to raise our debt ceiling.
The debt ceiling is America’s credit card limit. Currently, our annual credit card limit is $1 trillion, but the interest on what we owe to countries like China continues to climb because of past deficit spending.
As a nation, we continue to spend more than we take in, so if we don’t increase our credit card limit in March, we won’t be able to borrow enough money to pay our bills.
Technically, we’re already out of money. The Treasury Department reached its $16.4 trillion debt ceiling on Jan. 7, and now the agency is shuffling funds to pay bills for the next two months.
All this borrowing and deficit spending comes with a price.
After the 2011 debt ceiling fight, Standard & Poor’s dropped the U.S. credit rating a notch, and Moody’s is warning that Congress must agree on more stringent spending cuts or tax increases if we are to avoid a second downgrade. Illinois has already seen its S&P bond rating drop, so the consequences of political can kicking are real, not hypothetical.
So what does this mean to us?
We are borrowing too much money, and lenders are starting to doubt our ability to repay our loans. When our credit rating goes down, lenders charge higher interest rates and it costs more to borrow money. It is no different than what struggling families deal with every day.
Unfortunately, as The Economist magazine noted, American politicians are doing the same thing European leaders have done for decades — playing an irresponsible game of denial and delay that has brought Europe to the brink of collapse.
When our elected officials punt, we all lose. Refusing to make the tough choices in the face of dire economic conditions heaps new costs on families, struggling small businesses, hospitals and companies wanting to expand and hire workers.
Without addressing public pensions, health care costs and other government-funded programs, our political leaders will simply kick the can off the cliff. That will sap America’s economic strength and hurt the very families we want to help.