In postmodern societies, advancements in technologies have been considered the factor that makes countries economically and militarily dominant. Whoever can produce products at a faster rate while driving down costs dominates the global market. This is not the case anymore as there is something more powerful than bullets, planes and computers: debt. It’s pretty tough for the U.S. to stand up to China over international shipping lanes in the South Asian Sea when China has the ability to devalue the dollar.
It’s interesting how this “disease” known as debt was able to move globally. The addiction to spend on new programming has hit many countries. Ireland is in the hole seven times their Gross Domestic Product (GDP). The only way Greece will get out of debt is if they eliminate three-quarters of their government and tell the population that the new national retirement age is 185. Portugal, Italy and Spain are racing to see who can hit bankruptcy court fastest. Somewhere in this fray sits the U.S. We are in the hole 100 percent of our yearly GDP. This means we owe all that we will make this year.
If we default on debt, lenders disappear. The solution for Washington is to increase the national debt ceiling while making spending cuts. This is an oxymoron — cut the deficit by increasing borrowing limits. We’re assuming every Washington politician was either blind or completely ignorant over the last two years of the U.S. hitting the debt ceiling.
Any decision made in Washington will negatively impact states. There are only three options: increase revenue (tax), cut programming, and/or borrow more. Every time Washington increases taxes, state’s revenues actually decrease. If Washington cuts programs, responsibility falls on the states. In full disclosure, state politicians do this to counties all the time. Remember, the state used to handle mental health funding and responsibilities until it got expensive and now counties pick up the tab.
Iowa is currently in good financial health. Even with I-Jobs bonds being paid for over the next 18 years, Iowa’s rainy day and cash reserve accounts are actually looking good. With smart and sound budgeting practices and preparation, a potential derailment three years out can be avoided. That is as long as the federal government does not misbehave and states avoid picking up the tab for cash-strapped states like Illinois, New Jersey, California and Michigan.
I hope to see you in the district this summer. I enjoy meeting with constituents and hearing questions, comments and ideas.
Shawn Hamerlinck, a Republican, serves in the Iowa Senate. He represents Senate District 42, which covers portions of Clinton and Scott counties.