Stephen Goldsmith, the former Indianapolis mayor and current professor at Harvard, has a must-read column over at E21 on America's burgeoning debt crisis. In the past, Goldsmith writes, state and local governments have dealt with red ink in five ways: they've turned to the feds, they've incurred more debt, they've raised taxes, they've stalled for time, and they've deployed "incremental, stop-gap measures" to hold down the cost of government.
The problem, Goldsmith continues, is that those strategies won't work in an era when "the steady increase in the quantity and cost of public services, coupled with the needs of an aging population and public pension costs have produced a long term, structural deficit." The bailouts were only the beginning: Obama's 2010 budget increased domestic discretionary spending in a dramatic fashion, and entitlement spending is about to explode as the Baby Boomers begin to retire. The government will have to spend more each year just servicing the debt.
What can we do? Goldsmith doesn't say, promising to investigate potential solutions "in future columns." I came away with two conclusions: one, politicians are far more likely to raise taxes than cut spending, and two, no amount of extra taxes will quell a politician's urge to spend even more. Remember: America had budget deficits when the top marginal tax rate was upwards of seventy to eighty percent. Economic growth is the proven way to reduce the debt burden relative to the overall economy. Better hope for a boom soon.