Thursday, January 03, 2013

Promises that can't be kept

A man once operated a successful ice cream parlor on a bustling Main Street corner. He did a good business and made it a point to give some of his profits away to charitable causes. But, after a time, he decided he wanted to travel and enjoy life, so he hired a manager to oversee and improve operations while he was gone.

The manager started well, and naturally started to conceive ways to increase traffic into the store. After talking to some customers, he concluded what people liked was to get free stuff. So he began some promotions where people could get a free cone for patronizing the shop.

But then one day he noticed that a rich man in line got the same free cone that a poor man behind him got. Shouldn't someone in need get more free ice cream, he wondered?

So he devised a complicated means test for the free stuff, whereby the poorer you are, the more ice cream you could get. Privately, he also mused that because there were so many poor people, and because no one likes the rich, he would become the most popular guy in town.

Sure enough, traffic in the store increased. People came from all over to take advantage of the giveaway. To be sure, the "customers" kept returning; they were given promissory notes to redeem for years of future ice cream. People who weren't really needy began to show up demanding freebies. Pretty soon, the store began to run a deficit. The parlor's bookkeeper expressed concerns over these policies, but the manager shrugged them off. We'll pay the current deficit with tomorrow's profits, he confidently stated. People love us — business is bound to grow.

But the deficit is what grew — immensely. The killjoy bookkeeper again sounded the alarm: This can't go on for long. So the manager instituted new policies to cover the deficit in theory. He'd charge his rich customers more to subsidize the freebies for the poor.

And he was absolutely flabbergasted when the rich stopped buying his ice cream.

But by then, there was no stopping. Flocks of people showed up every day for their free cones, not only taking what was offered but demanding more and more. After all, they were entitled to these frozen treats — entitled! And give us dinner, too. Why not? Someone else is paying. Even the starry-eyed manager could see a tipping point arriving down the road, but he enjoyed being the most popular guy in town, so he just crossed his fingers that it wouldn't crash until he retired.

Finally, the store's owner heard what was happening and hastened back. He immediately fired his manager and issued a statement. The previous management, he said, had irresponsibly made promises that could not be kept. While he would continue to support charitable causes, as he always had to the best of his ability, he simply could not provide the endless largesse people expected.

What's the point of this ridiculous story? While not a perfect analogy, the federal government is the ice cream store, and it has committed itself to an unsustainable course and made promises that can't possibly be fulfilled in the long run.

Last month, former congressmen Chris Cox and Bill Archer wrote an article in The Wall Street Journal revealing the real national debt — not the $16 trillion usually mentioned these days. Instead, counting all of the liabilities for social programs and entitlements, the number is really an unthinkable $87 trillion. The authors further calculate this is an amount that cannot be realistically paid. The federal government will soon need $8 trillion a year in income. Confiscating — not taxing, confiscating — all of the adjusted gross incomes above $66,000 plus all corporate income would yield less than $7 trillion. Of course, such taxation is not a feasible policy for even one year.

As I wrote this, the fiscal cliff negotiations were still ongoing. But however they were resolved, the real problem looms down the road, and not so far down the road that we can responsibly ignore it. We simply cannot tax our way out of the mess politicians of both parties have made. Dire spending cuts have to be made and major entitlement reforms instituted, and we have to be grown up enough to admit it. Like the store owner above, we have to confess that promises were made that realistically cannot be kept.

And we spoiled Americans, to save the country, must lower expectations and accept this new reality.

Long is a Roanoke Times columnist and director of the Salem museum.

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