The Limits of Sustainability and Opportunities in the Social Economy

Abstract

Ten years after 9/11, we as a nation have had to address issues of sustainability that other generations of Americans have not faced in quite the same way. Considerable attention, and understandably so, has focused on the security of our borders and threats to our homeland. Environmental disasters have tested our maturity as well, and this entire editorial could be devoted to that topic alone. But here we focus on economic and social sustainability, because the two closely intertwine, and the path we are on is not sustainable from either point of view. We begin with economic sustainability, because that probably weighs most heavily on the minds of Americans at this time, and end with potential opportunities in the social economy. ECONOMIC SUSTAINABILITY When Standard & Poor's lowered the U.S. credit rating in August 2011, a deep and profound shudder ran through the hold of our ship. However much we might want to blame political deadlock for the downgrade--and there is plenty of blame to go around--the reality remains that we can no longer sustain the fiscal path we are on. The federal budget deficit--the difference between actual revenues and budgeted spending-is currently about $1.5 trillion. This is roughly equivalent to 10 percent of the gross domestic product (GDP), the market value of all goods and services produced in the United States. Four years ago, the federal budget deficit was about 3 percent of GDP. Economic recession and war operations aside, the federal government has been running budget deficits every year since 1970 except four, and the additive effect on the national debt is alarming. The national debt--the cumulative amount the federal spending in excess of revenues--now stands at about $14 trillion. Approximately 70 percent of GDP, the rate is much higher now than historical averages around 40 percent, a reflection of the deep recession and recent tax policy decisions. More than half of the national debt is in the form of debt securities sold to private investors, mostly from other countries, unlike public debt in the past. Fortunately, current interest rates on the securities are very low. When rates return to historical averages, the national debt will grow exponentially, putting future taxpayers at great risk, not only in having to pay off the debt, but also in owing payments to investors who may not have U.S. interests at heart. Clearly, this is not sustainable; for if sustainability means anything, it means creating preconditions to ensure the economic well-being of future generations. From a fiscal perspective, we have a revenue problem and a spending problem. The Office of Management and Budget (2012) reports that during fiscal year (FY) 2010, the last completed FY, the federal government collected $2.16 trillion in tax revenue. Forty percent ($865 billion) came from employment taxes for social security and social insurance, 42 percent ($899 billion) from individual income taxes, 9 percent ($191 billion) from corporate income taxes, and the balance ($207 billion) from excise and other taxes. Yet total federal revenues for the FY, relative to GDP, were the lowest in half a century--a mere 14.9 percent. What contributed to the historic drop in federal tax revenues? Dramatic falloffs in individual and corporate income tax revenues from the recession clearly had the greatest impact. The Bush tax cuts, coupled with other tax policy decisions, had a substantial impact as well, with arguably little payoff for the economy (Pew Charitable Trusts, 2011). A subtle but powerful factor was also at work. The U.S. tax burden was substantially lower than that of other major countries, and it has been for quite some time (Urban Institute-Brookings Institution Tax Policy Center, 2010). Having noted that, we must quickly cite the nation's daunting spending problem as well. The Office of Management and Budget (2011) reported that the federal government spent $3. …