Its funny there is a sense of urgency this time around on Americas debt, not only in Washington with our political leaders, but also with us back home on Main Street and from sea to shining sea in our country.
This issue has risen to a higher-stakes level than ever before. We have seen how the debt issue has brought Greece and other countries in Europe to their knees. We have learned those countries simply cannot control their public spending. Well, I believe our country is now in that boat, too; Washington cannot control spending.
For every dollar we spend in Washington, 58 cents comes from the taxes that you and I pay and the other 42 cents is borrowed. How could any of our households survive if we lived like that? That is the state of the U.S. government.
Many in Washington cannot simply say no to spending. Both parties are at fault for this. There is only one answer to control Washingtons spending binges: a balanced budget amendment. The rhetoric by both political parties that they will control spending is not believable anymore. Can we trust Washington to control spending as our nations debt approaches $15 trillion?
Americas national debt has skyrocketed from about $1 trillion in 1981 to close to $15 trillion today. That is $45,000 for each American and the debt keeps growing. According to the nonpartisan budget scorekeeper, the Congressional Budget Office, the nations debt could reach an astonishing 90 percent of gross domestic product in less than a decade, with the government spending almost $1 trillion on interest payments alone.
Many in Congress are pushing for a balanced budget amendment as the answer to our debt issues and here is why those folks are right. Forty-nine states have to balance their budgets. Why is it that 49 states have a balanced budget requirement and our country does not? Many members of Congress served in their state legislatures before moving on to Congress. They know about a balanced budget, they lived under it and made sure their states balanced their budgets.
If our state capitols can handle a balanced budget amendment, why cant Washington? The states that make up our country must balance their budgets by making tough decisions. Washingtons track record is that they cannot control themselves when it comes to spending. It is time for the approval of a balanced budget amendment to force their hands and control spending.
Countries that we recognize as being fiscally strong, such as Germany, have approved such an amendment. In 2009, Germany's constitution was amended to introduce the Schuldenbremse ("debt brake"), a balanced budget provision. This will apply to both the federal government and the Lder (states). From 2016 onward, the federal government will be forbidden to run a deficit of more than 0.35 percent of gross domestic product (GDP).
While many will argue against a balanced budget amendment (and arguments coming out of Washington all sound good and could convince an Eskimo to buy ice), the fact is, those arguments are shallow. Washington cannot control spending. Those who oppose a balanced budget amendment are not offering a detailed written plan that makes the tough decisions, just rhetoric.
Rhetoric and speeches will not balance our nations finances or keep America strong; making tough decisions will.
Of course, with making spending cuts, tax loopholes should be closed, too. If a corporation operating in our country pays little to no corporate income taxes, that loophole should be closed. Credit unions enjoy the benefit of a tax loophole that no other financial institutions enjoy.This loophole allows credit unions to pay neither federal nor state corporate income taxes. In these tumultuous economic times with such great deficits, each and every loophole should be considered in order to balance our nations budget. With our nations widening debt, now is the time for this administration and Congress to look at removing the tax loophole that the large credit unions enjoy.
Is it fair that a hard-working family of four or a small business struggling to make it in this economy pays more in state and federal taxes than a billion-dollar credit union? We know the answer to that question: No.
Americans are tired of Washington not living within its means like all of us do. We are tired of politicians telling us we can lose weight by eating cake. We like and respect politicians who will tell us the hard truths and make tough decisions. The financial health of our country is at stake. If we do not reduce this debt, and if we fail to reach an agreement in this debt-ceiling debate, interest rates may rise, the credit rating of the country will decline requiring that more monies go to pay interest, and loss of confidence will occur with the public and the financial markets. If Congress and this president fail to control and cut spending, our debt will balloon to the $20 trillion mark in just a few short years. America will be weakened if we fail to make tough decisions. We need leaders and leadership at this hour.
This is a guest column by Alex Sanchez, president and CEO of the Florida Bankers Association.
