The heads of President Barack Obama's national debt commission painted a gloomy picture Sunday as the United States struggles to get its spending under control.
Republican Alan Simpson and Democrat Erskine Bowles told a meeting of the National Governors Association that everything needs to be considered -- including curtailing popular tax breaks, such as the home mortgage deduction, and instituting a financial trigger mechanism for gaining Medicare coverage.
This is the first of what will prove to be several trial balloons designed to alert the American people to the unavoidable decline in their standard of living that they should expect. Americans have postponed this decline for two decades by whittling away national strengths inherited from our ancestors. The dollar's status as the world's reserve currency allowed us to borrow from foreigners on the premise that we can print our own payments in an emergency. That status won't last once China's central bank or one of the Middle Eastern SWFs sends our Treasury department a foreclosure notice.
The mention of the home mortgage tax deduction ought to raise eyebrows among lowbrow Americans but it probably won't. Americans have come to view home ownership as both a financial entitlement and right of passage into adulthood. Those of us born a century too late to settle the frontier as pioneers could have our own little suburban homestead, mortgaged to the hilt, as a memento of America's westward progress. Millions of Americans have incorporated that tax deduction into their household budgets for years as a lifestyle subsidy on the advice of their tax preparers. Taking it away will do much more than pull the rug out from under consumer spending (remember, that's 70% of GDP). It will cut a psychic swath through a bourgeoisie that aspired to own a little piece of the frontier in the safe, predictable confines of suburbia.
The mere suggestion that entitlements like Medicare should be means-tested will provoke further howls form the aging Boomers in what used to be the middle class. Sixty-somethings might somehow escape the means tests since they're now the largest and most active voting constituency, so Gen X (that's me!!) will get stuck with at least part of the tab. My contemporaries can forget about upward mobility or discretionary spending. We will pay for the excesses of our parents.
The commission's work is far from done. There will be more trial balloons, more leaks, and a final report that most Americans will blithely ignore. I'll read it because I'd like to know how far I'll have to dial back my own spending (which isn't much BTW since I value frugality) so Uncle Sam can pay his creditors. I personally endorse eliminating the mortgage tax deduction and all entitlements like Medicare and Social Security. That puts me at odds with most Americans for now, but they'll all eventually have to come around anyway. Americans need to wake the hell up about the bill coming due, but most of them are sound asleep.
Full disclosure: Anthony J. Alfidi had to drink a rum and soda cocktail to write this post.
