Sacrifice as a form of national service is historically linked to that last full measure of devotion: a soldier laying down his or her life for the country. This is certainly part of what we memorialize when we speak of the Greatest Generation. We venerate that they willingly ran into gunfire for God, family, and country.
But we do their parents a disservice if we forget other types of sacrifice. Cutting creature comforts to save future generations qualifies as honorable service and sacrifice.
In the 1930s, when the Greatest Generation grew up, their parents had to make significant sacrifices because of the Great Depression. There were far fewer resources for families, and hard choices had to be made. “We can’t afford a large apartment, we’ll all have to share one bedroom… We can’t afford meat, we’ll have butter sandwiches… We can’t all afford the movies, maybe just the kids can go.” Hard choices, but ones that nurtured their children through a difficult period, allowing them to lead the country to bigger and better things.
Now, we are in a position to be the parents of the next Great Generation, and we should acknowledge the honor and opportunity in it. By making domestic sacrifices now, we can instill in our children all the attributes that the Greatest Generation had. Our sacrifices will not be made into Hollywood movies. There is little glamour in consistently subordinating our material comfort for others. There is honor in it, as well as a quiet glory. But it is not glamorous.
We think it is necessary, though. If we spend the next twenty years saving more aggressively, purchasing more prudently, and governing more wisely, our children and their children will have better lives.
That is not to say our lives will be bad. But it is to say that for a number of years, we will not be as physically comfortable as we might be otherwise. The parents of the Greatest Generation are an apt example. They made sacrifices in the 1930s, but as they aged and retired after World War II, their standard of living was much improved. As the country rose, so did they. That’s our opportunity now.
We have already begun to talk about these sacrifices on this site. They include smaller houses, later retirement, and higher taxes for better education. Those sacrifices cut broad swaths across luxuries – some would even say rights – of the vast majority of Americans. Young workers don’t want to give up the dream of a big family house before they even start saving for it. Older workers don’t want to continue working after working so hard for decades. Americans who feel they pay too many taxes already don’t want to pay more.
But these are the sacrifices we can make. Smaller homes mean more savings, greater wealth, and more purchasing power. Later retirement means solvency for social security and the federal government. Higher taxes for education means a talented and prepared workforce that strengthens the economy when we retire. These sacrifices are of a type that we don’t publicly honor. But we should. And if we now begin to make these sacrifices and others like them, future generations will publicly honor our Sacrifice Generation.
Wednesday, July 8, 2009
Monday, July 6, 2009
Pete Peterson Wants to Make Hard Choices
Recently, we ran across an op-ed piece from Pete Peterson, founder of the Blackstone Group. In it, he describes his plan to take the $1 billion he made from Blackstone’s public offering and start his own charitable foundation. He worries about that “our children are unrepresented.” We’re creating debts, problems, and unresolved situations that they will have to address, but will have fewer options to do so because of our behavior and policies.
He’s right to be concerned. We’re concerned too and are convinced that the only way to avoid dumping enormous problems in our children’s laps is to make hard choices now. If we make choices now that address some of our most glaring problems – unfunded entitlement programs, inadequate public education, unnecessary government spending, insufficient personal wealth – we can avoid passing on our problems to our kids. The world does not soften for each successive generation. Our children will have their own problems. They don’t need ours.
The Peter G. Peterson Foundation (and similar organizations, like the Concord Coalition) has the right idea: educate the public about the fiscal problems of our country. So many people are unaware. But the solution cannot be education alone. We must also embrace our challenge and opportunity to sacrifice for our country and children. By giving up some personal comforts, by working a little later into life, and making other small changes to our lives, in 20-30 years we can give to the next generation a solvent government, an older generation with retirement wealth, and a country that is more civic minded.
Our first step: start making hard choices. We’ve made easy ones for too long.
He’s right to be concerned. We’re concerned too and are convinced that the only way to avoid dumping enormous problems in our children’s laps is to make hard choices now. If we make choices now that address some of our most glaring problems – unfunded entitlement programs, inadequate public education, unnecessary government spending, insufficient personal wealth – we can avoid passing on our problems to our kids. The world does not soften for each successive generation. Our children will have their own problems. They don’t need ours.
The Peter G. Peterson Foundation (and similar organizations, like the Concord Coalition) has the right idea: educate the public about the fiscal problems of our country. So many people are unaware. But the solution cannot be education alone. We must also embrace our challenge and opportunity to sacrifice for our country and children. By giving up some personal comforts, by working a little later into life, and making other small changes to our lives, in 20-30 years we can give to the next generation a solvent government, an older generation with retirement wealth, and a country that is more civic minded.
Our first step: start making hard choices. We’ve made easy ones for too long.
Friday, July 3, 2009
De-Incentivize Big Homes
For decades now, the federal government has essentially paid us to buy homes. This was a policy choice, and an easy one. People already wanted to buy homes. They were more than happy to allow Washington to give them money to do what they already wanted.
And this is not an entirely bad idea. Following World War II, the GI Bill allowed millions of veterans to obtain mortgages and purchase houses that they never would have been able to without government assistance. It is estimated that by 1955, 4.3 million home loans had been granted under the program with a total face value of $33 billion. This allowed many Americans to gain unprecedented equity in a way that was never possible before the GI Bill. The great expansion of wealth in our country since World War II can be attributed in no small part to the mortgage assistance given to veterans.
But that assistance has long since been replaced by unnecessary and inappropriate bribes. Here’s a list of some of the incentives offered by the federal government to induce home ownership:
- The interest you pay on your mortgage is tax deductible, up to $1 million.
- You don’t pay taxes on any profit you make when selling your home, up to $250,000 for a single person and $500,000 for a married couple.
- Local property taxes are tax deductible.
- Moving expenses to a new home are tax deductible.
That’s a lot of money being given away to convince people to do what they already want to do. The American Dream is already so tied up in home ownership, that incentives are only necessary up to the point where they encourage Americans to build equity and wealth as another form of savings. Anything beyond that is wasteful.
And we’re well beyond that. Nowhere is this more apparent than in the size of American homes. The average American home in 2006 was 2,349 square feet; in 1950 it was half that. With that extra size comes extra costs: heating, cooling, maintenance, furnishing, and all the stuff that can fit in the added space. We expand with our space. More space equals more use and more stuff. Concerns about this are causing many to seek smaller homes.
Thoughtful people have also drawn a connection between home size and quality of life. Today, it is common for both spouses to work, yet households feel like they have less money than they did 60 years ago. House size is large factor. Smaller homes can be run with less money, allowing one spouse to stay at home with the kids, at least part time.
Our suggestion is to make the hard choice and slash tax incentives for homes that are larger than 1500 square feet. If Americans want to buy a reasonably sized home where they can live, where they can raise their children, and that will earn equity for their savings, there should be a tax benefit for that. But if Americans want a large home for luxury, they will have to pay for it.
This might mean our kids will have to share a room. Or that we won’t have three TVs spread throughout the family room, play room, and den. In general, we won’t be quite as physically comfortable as we’d like to be. But this type of physical comfort is the easy choice. If we had made the hard choice decades ago to stop paying ourselves for larger homes, America might be a slightly better place now. Children would have fewer TVs to watch. They might have to get along better with others. And we all might have to talk more with one another.
Wednesday, July 1, 2009
Mandatory Service
As high schools in the United States increasingly require volunteering or some service for graduation, a debate has emerged about whether this is actually volunteering and whether it is beneficial to students.
Some have looked beyond this debate, however, and started advocating for a formal mandatory service program on the national level. The basic idea is this: at some point after high school, every American young adult must complete a year of national service. It can be in the military, teaching, working with the poor, or some other form of community service. And the federal government would pay for it.
Some argue that this type of program is too expensive for undetermined results. But while it is certainly expensive, the results are almost always positive. Talk with anyone who was formerly in a position performing national service, and almost to a person they report that the experience had a positive impact on them and forced them to be more civically engaged later in life.
In 2010, the US Census Bureau estimates that the US population will be 310,232,863 people. The percentage of that population that is between the ages of 0 and 19 is 27.4%, or 85,003,804 total people. Assuming the federal government pays each of those people $25,000 (which includes salary and all benefits) for one year of service, the total cost for twenty years of civically minded young adults contributing to the nation is $2,125,095,100,000. This is absolutely a lot of money, even when spread over 20 years. And it is a hard decision to commit to that much money.
But had we made this hard decision twenty years ago, there would be more volunteers in inner cities working with economically blighted areas. There would be more campgrounds cleared on federal land. There would be a larger and deeper respect for the military, as more of our children would have joined and the burdens of military families would be more widely shared. In short, there would be more of many things that we want more of. A hard decision to pay for mandatory national service would have led to a better country today.
Some have looked beyond this debate, however, and started advocating for a formal mandatory service program on the national level. The basic idea is this: at some point after high school, every American young adult must complete a year of national service. It can be in the military, teaching, working with the poor, or some other form of community service. And the federal government would pay for it.
Some argue that this type of program is too expensive for undetermined results. But while it is certainly expensive, the results are almost always positive. Talk with anyone who was formerly in a position performing national service, and almost to a person they report that the experience had a positive impact on them and forced them to be more civically engaged later in life.
In 2010, the US Census Bureau estimates that the US population will be 310,232,863 people. The percentage of that population that is between the ages of 0 and 19 is 27.4%, or 85,003,804 total people. Assuming the federal government pays each of those people $25,000 (which includes salary and all benefits) for one year of service, the total cost for twenty years of civically minded young adults contributing to the nation is $2,125,095,100,000. This is absolutely a lot of money, even when spread over 20 years. And it is a hard decision to commit to that much money.
But had we made this hard decision twenty years ago, there would be more volunteers in inner cities working with economically blighted areas. There would be more campgrounds cleared on federal land. There would be a larger and deeper respect for the military, as more of our children would have joined and the burdens of military families would be more widely shared. In short, there would be more of many things that we want more of. A hard decision to pay for mandatory national service would have led to a better country today.
Sunday, June 28, 2009
The California Anti-Model
When looking for a state to emulate as a model for making hard choices, you could do a lot worse than the opposite of everything California has done for its schools in the last 30 years. Beginning in 1978 and continuing to this day, California has refused to make hard decisions on behalf of its schools, and the full ramifications are starting to emerge now.
In the 1960s, California had a model school system. Half of the state’s high school graduates went to college, compared to a third in the rest of the country. As California State librarian Kevin Starr said, “There was a mood that California had to educate the work force for this wonderful future that awaited it. Public schools were being built by the hour. An entire generation of talented men and women went into Public School teaching and administration.” The wonderful future that Californians foresaw was based on the fact that major industries – including entertainment, engineering, education, technology, and agriculture – were increasingly calling California home. Lured by jobs and schools that promised bright futures, Americans from other states were moving to California by the thousands everyday. The state became the most populous in the nation in 1962, with 17 million residents.
California schools – including its admirable public universities – continued to be one of the nation’s best through the better part of the 1970s. Much of their operating funds came from property taxes, although a California Supreme Court, Serrano v. Priest, altered that to a certain extent. But in general, as real estate prices increased due to a growing population, California schools benefited. This led to better students, which led to a better work force, which led to the better future Californians foresaw.
However, 1978 changed that. In that year, California voters passed Proposition 13 as a ballot initiative. Prop 13 made two dramatic changes: the annual real estate tax on a parcel of property was limited to 1% of its assessed value, and the assessed value could only be increased by a maximum of 2% a year, unless the property changed ownership. The desired result was obtained: taxes dropped precipitously. But it also meant that as land values have increased exponentially in California over the last 30 years, schools haven’t benefited. Measured in year 2000 dollars, spending per pupil in California went from more than $600 above the national average in 1978 to more than $600 below the national average in 2000. Not surprisingly, California’s schools have plummeted. The envy of American public schools has collapsed. According to the National Assessment of Educational Progress test, only Louisiana and Mississippi students score lower in basic reading and math.
Not surprisingly, California’s future no longer looks bright. Its budget deficit has grown to over $40 billion and its bond rating has been lowered. The state’s inability to educate its work force has caught up with it as well: unemployment in California is well over 10%, which is high even for the current economic times.
Had Californians made a hard decision 30 years ago, the severity of these events could have been avoided. California’s model – higher taxes, better schools, a sought after work force – helped build California into the eighth largest economy in the world. But it required the sacrifice of higher taxes. That hard decision made the system work, and everyone in California benefited. Now, Californians are faced with much harder decisions – “Do we slash state spending by 25%? Do we increase taxes to 50%?” - if they want to save their faltering economy and state.
We would do well to learn by the California anti-model. Making the sacrifice now to pay for an excellent work force, avoids greater sacrifice in the future. And we will reap the benefits of having a thriving economy, meaning all decisions will be a little less hard. In that way, it is a sacrifice for ourselves as well as for others.
In the 1960s, California had a model school system. Half of the state’s high school graduates went to college, compared to a third in the rest of the country. As California State librarian Kevin Starr said, “There was a mood that California had to educate the work force for this wonderful future that awaited it. Public schools were being built by the hour. An entire generation of talented men and women went into Public School teaching and administration.” The wonderful future that Californians foresaw was based on the fact that major industries – including entertainment, engineering, education, technology, and agriculture – were increasingly calling California home. Lured by jobs and schools that promised bright futures, Americans from other states were moving to California by the thousands everyday. The state became the most populous in the nation in 1962, with 17 million residents.
California schools – including its admirable public universities – continued to be one of the nation’s best through the better part of the 1970s. Much of their operating funds came from property taxes, although a California Supreme Court, Serrano v. Priest, altered that to a certain extent. But in general, as real estate prices increased due to a growing population, California schools benefited. This led to better students, which led to a better work force, which led to the better future Californians foresaw.
However, 1978 changed that. In that year, California voters passed Proposition 13 as a ballot initiative. Prop 13 made two dramatic changes: the annual real estate tax on a parcel of property was limited to 1% of its assessed value, and the assessed value could only be increased by a maximum of 2% a year, unless the property changed ownership. The desired result was obtained: taxes dropped precipitously. But it also meant that as land values have increased exponentially in California over the last 30 years, schools haven’t benefited. Measured in year 2000 dollars, spending per pupil in California went from more than $600 above the national average in 1978 to more than $600 below the national average in 2000. Not surprisingly, California’s schools have plummeted. The envy of American public schools has collapsed. According to the National Assessment of Educational Progress test, only Louisiana and Mississippi students score lower in basic reading and math.
Not surprisingly, California’s future no longer looks bright. Its budget deficit has grown to over $40 billion and its bond rating has been lowered. The state’s inability to educate its work force has caught up with it as well: unemployment in California is well over 10%, which is high even for the current economic times.
Had Californians made a hard decision 30 years ago, the severity of these events could have been avoided. California’s model – higher taxes, better schools, a sought after work force – helped build California into the eighth largest economy in the world. But it required the sacrifice of higher taxes. That hard decision made the system work, and everyone in California benefited. Now, Californians are faced with much harder decisions – “Do we slash state spending by 25%? Do we increase taxes to 50%?” - if they want to save their faltering economy and state.
We would do well to learn by the California anti-model. Making the sacrifice now to pay for an excellent work force, avoids greater sacrifice in the future. And we will reap the benefits of having a thriving economy, meaning all decisions will be a little less hard. In that way, it is a sacrifice for ourselves as well as for others.
Friday, June 26, 2009
Raising the National Retirement Age
For many Americans approaching the age of 65, retiring then is a birthright. That's the age when social security has historically provided full monthly payouts to retirees.
But that age was actually changed in 1983, or rather, Congress legislated to change that age gradually beginning in 2000. As a result, everyone born between the years 1943 and 1954 will be entitled to their full social security payouts starting at age 66; for those people born in 1943, they turn 66 this year. For people born in 1960 and later, they are entitled to full payouts when they turn 67.
Yet even with this delay of the national age of retirement, social security is in danger insolvency. It is estimated that social security payouts will exceed social security taxes collected sometime in the year 2019. For a time, there will be sufficient funds to honor all social security obligations in the social security trust fund, which the federal government has developed over the decades by investing in US bonds the difference between the social security taxes collected and the social security funds paid out. However, those funds will eventually exhaust themselves. The Social Security Administration estimates this will happen by 2041; the Congressional Budget Office estimates by 2052.
Either way, we know we're on borrowed time. Had we made the hard choice to push back the national retirement age more aggressively in 1983, we wouldn't be in this situation now. And as a result, we're left with even harder choices to make now. But if we make those harder choices today, we'll save future generations of social security beneficiaries from making choices that are even worse. Our sacrifice will be their support.
Our suggestion: push back the retirement age aggressively. Today, if we begin to push back the national retirement age to 73, we will restore long term solvency to the social security trust fund, saving the program for future retirees and saving our tax dollars which almost certainly would have gone to bolster the gap in social security funds.
But that age was actually changed in 1983, or rather, Congress legislated to change that age gradually beginning in 2000. As a result, everyone born between the years 1943 and 1954 will be entitled to their full social security payouts starting at age 66; for those people born in 1943, they turn 66 this year. For people born in 1960 and later, they are entitled to full payouts when they turn 67.
Yet even with this delay of the national age of retirement, social security is in danger insolvency. It is estimated that social security payouts will exceed social security taxes collected sometime in the year 2019. For a time, there will be sufficient funds to honor all social security obligations in the social security trust fund, which the federal government has developed over the decades by investing in US bonds the difference between the social security taxes collected and the social security funds paid out. However, those funds will eventually exhaust themselves. The Social Security Administration estimates this will happen by 2041; the Congressional Budget Office estimates by 2052.
Either way, we know we're on borrowed time. Had we made the hard choice to push back the national retirement age more aggressively in 1983, we wouldn't be in this situation now. And as a result, we're left with even harder choices to make now. But if we make those harder choices today, we'll save future generations of social security beneficiaries from making choices that are even worse. Our sacrifice will be their support.
Our suggestion: push back the retirement age aggressively. Today, if we begin to push back the national retirement age to 73, we will restore long term solvency to the social security trust fund, saving the program for future retirees and saving our tax dollars which almost certainly would have gone to bolster the gap in social security funds.
Thursday, June 25, 2009
Something's Gotta Give
The premise from which these posts are written is simple: Something’s gotta give.
That’s it.
As a country, America has disliked making choices for several decades. We want lower taxes and more social services. Strong industrial growth and a clean environment. The benefits of two incomes and a stay-at-home spouse. Whether the product of arrogance or American optimism, we have believed that hard choices about the allocation of our resources were unnecessary.
But hard choices are necessary, and avoiding them is not an infinite loop. Eventually those choices must be made, and they only get harder the longer we put that off. Consider a few examples:
- If we had established higher fuel standards 15 or 20 years ago, Detroit automakers wouldn’t have over invested in vehicles with low gas mileage, which combined with the rising cost of energy to kill the sector of the car industry that Detroit relied on most. It would have been a hard decision 20 years ago, but it would have been less painful than the bankruptcies Chrysler and GM are encountering now.
- If we had properly established universal health care in the early 90s (when Clinton wanted to do it) or the 70s (when Nixon wanted to do it), our health care costs wouldn’t be spiraling out of control now. There were solutions at the time that would have effectively provided widespread coverage while shifting incentives within the industry to avoid unnecessary procedures. It would have been a hard decision 15 or 35 years ago, but we wouldn’t be faced with a health care industry that eats more of our income every year now.
- If we had maintained a budget surplus at the beginning of the decade, we would be in a better position to prop up the economy now without the risk of inflation. It would have been a hard decision 10 years ago to maintain or lower government spending while there was a surplus, but we wouldn’t face the economic hardship or potential for inflation that we do now.
And there are other examples like those. The premise again is that something’s gotta give. Our suggestion is that we should give. For an entire generation.
Americans today should collectively decide to sacrifice for the next 20 years in order to set up the next 100. This is a vague concept that we’ll flesh out with our posts here. But the idea in general is simple. By reducing particular personal and government spending while allowing certain taxes to increase and saving more, we can restore long-term prosperity to the nation. We’ll sacrifice for a generation to save the generations that follow.
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