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Thu August 4, 2011
Debt debate aftermath
Well, the great battle over the federal debt limit is over, at least for now. For the last several weeks, most of us seem to have been arguing over this, whether or not we understood it.
This came just months after the great battle in Lansing over Governor Snyder’s budget cuts. Now that these momentous issues have been decided, we can move on to more interesting debates.
Such as, for example, how long it will be before Justin Verlander pitches another no-hitter. But seriously, there’s a tendency to think that now that all these budget cuts have been passed we don’t have to worry any more.
The unpleasant truth is that the effects of all these changes haven’t really started, on either the national, state or local levels.
We’ll begin to see some of the consequences this fall, when our kids go back to public schools with fewer teachers and fewer programs. Some of my students at Wayne State are already howling over their higher tuition and fee payments.
We don’t have any idea yet of the social costs of cutting people permanently off welfare. If the governor’s tax cuts produce a fast bumper crop of new jobs, and some of these long-term unemployed are hired, great. If that doesn’t pan out, we’ll all be in trouble.
As for the cuts made by the federal debt deal, just how they will affect Michigan is impossible to say. That’s because we don’t yet know what is going to be cut. That hasn’t been determined. We know that almost a trillion dollars is to be slashed over the next decade. Some will probably come from school aid and housing programs.
Later, there is supposed to be a second wave of cuts that may be felt even more deeply in Michigan – farm subsidy programs; Medicare and Medicaid, and federal retirement programs.
Co-pays for health care and prescription drug coverage are more than likely to increase as well.
Some of the effects of all this are sure to be deliberately masked or delayed at all levels, because next year is an election year, and politicians of both parties have a vested interest in postponing the pain. But pain there will be. For one thing, economic experts are universally agreed that interest levels are bound to rise.
That means the cost of borrowing will too. The Republicans who control every branch of government in Michigan, plus the U.S. House of Representatives, are adamant that taxes not be raised.
And we have to pay for all our spending, somehow. One of the few good things about the recent hard times is that inflation has stayed very low. Eventually, economists say, that’s bound to change, which will present a new set of problems.
Don’t get me wrong. Some of the painful austerity we’re facing is sadly necessary. I think tax increases on those who can afford to pay should have been part of this. The well-off are paying a far smaller percentage of their income in taxes than they were in the prosperous nineteen-fifties. But in the last thirty years, the national debt has climbed from a trillion dollars to fourteen trillion, with no end in sight. There are limits to every credit card, and the years of peanut butter instead of steak seem to be looming ahead.