Montana’s Constitution assures the Legislature can’t spend more on services or tax breaks than the state collects in revenues. This simple declaration by the people keeps our books balanced. And balanced they have been, making Montana one of just two states in the nation to remain in the black.
Nationally, the debt situation is bleak. Today, debt hovers around $14 trillion, up from $10 trillion in 2008 and $6 trillion in 2002. It is hard to imagine that Congress will suddenly cut enough from the budget to balance our books. Interest payments alone on our national debt are some $200 billion annually. But instead of being frugal, Congress doled out $850 billion in borrowed tax cuts to stimulate our lagging economy.
Accountants figure we will increase our debt $1 trillion annually. Foreign governments hold about one-quarter of all U.S. debt, with China and Japan each possessing sizable stakes.
The average American middle-class household is not coping much better. Two decades ago, the debt to income ratio was around 83 percent. Ten years ago it rose to 92 percent. But in 2007, during the peak of a speculative real estate boom, that ratio ballooned to 130 percent.
On the other hand, Montana has it pretty good. Our unemployment, while unbearably high, is still much lower than the national rate. And state revenue collections are on the uptick. But Montana’s public pensions are not actuarially sound over 30 years, with $3 billion unfunded. This is the result of bad investments and a Legislature that mandates an unrealistic 8 percent return. This mandate forces risky investments with our public dollars.
Even if it feels like a recession in Montana, business is getting better – slowly but steadily. Some lawmakers suggest that Montana is in worse financial shape than it actually is. My business advice to these naysayers: entrepreneurs invest in positive management. Don’t talk us into a double-dip recession. Montana is a good investment and economic prosperity curbs debt.
In Washington, D.C., the “starve the beast” rhetoric is simple: cut spending, ban earmarks and dish out cuts. And many are willing to wager their Social Security and Medicare benefits that they can stop what they perceive as big, wasteful government. We are no longer accustomed to being frugal. But while we must be prudent, we must also invest in infrastructure, education, technology and energy.
Never mind the irony, the reality of national debt is far more complex than simple sound bites. Many leaders privately acknowledge that a credible debt recovery plan may require those dreadful, targeted tax increases, coupled with tough stands on spending and corporate tax cuts.
Many middle-classers are still waiting for some assurance that we will get a good value for our existing tax dollars. Homeowners will be shocked that the 2010 tax cut deal omitted the $500 to $1,000 property tax credit for those filing standard deductions. The middle class cannot solely bear the burden of retiring debt if America is to recover.
A movement to free ourselves from the shackles of an unsustainable debt will require a national sacrifice. We must all give a bit, if we expect a positive return. The burden cannot simply be shouldered by the middle class or those with the least.
One can only hope that Congress acts to rid the nation of unsustainable debt and to share in the sacrifice. Just as homeowners must again live within a budget, something Montana has been doing for decades, America must pay down our debt to return to prosperity.
Most of us still believe our best days are ahead us. Congress and Legislature must balance our ledgers with the middle class in mind. And it must put forth a credible plan to buckle down on debt.