The Folly of Praying for a Crisis

The fiscal and environmental disasters that we know are going to happen need to be dealt with now.
by , | December 5, 2012

The daunting array of long-term-challenges that our federal, state and local governments face share one essential characteristic: Problems that are preventable if action is taken now will grow into destructive crises in the years ahead if they are not managed proactively. The aging of the population and rising health-care costs are precipitating a range of fiscal challenges. At the same time, the warming of the planet is posing new challenges to our infrastructure and communities, epitomized by the devastation caused by Hurricane Sandy.

Some crises are unanticipated and unimagined. Public officials are taken by surprise, and we expect them to rise to the occasion. This was the Sept. 11 scenario. Unlike 9/11, however, the crises that will be brought about by fiscal challenges and climate change are known and predictable. The worst thing we can do is wait until those crises occur to deal with them.

In the federal budget arena, the Government Accountability Office, the Congressional Budget Office, the Office of Management and Budget and other forecasters have been showing for two decades that the nation's long-term fiscal path was unsustainable. If no substantive changes are made on the tax or spending sides of the budget, two decades from now the aging of the population and rising health-care costs will send the budget into deficits exceeding 20 percent of GDP. Federal debt will absorb all savings in the economy, choking off capital formation and collapsing economic growth.

State and local governments are also on an unsustainable fiscal course, with deficits projected to exceed 5 percent of the economy. Unlike the federal government, states and localities would have to take a series of increasingly difficult measures to close the rising fiscal gaps each year to bring about the balanced general-fund budgets that most of them are constitutionally required to maintain.

And the impact of global warming appears, if anything, to have been underestimated. We have known for years that major cities along seacoasts were poorly protected from the ravages of major storms. The regional cost from Sandy has been estimated at $50 billion, making it the second most destructive storm in U.S. history after Katrina.

Unlike with 9/11, we have two advantages in dealing with these twin public-policy challenges: We have definitive information about the extent of the problems, and we know how to fix them in ways that would head off the worst consequences. In the case of Social Security, for instance, we know that postponing reforms for another 10 years would double the size of the tax increases or spending cuts necessary to stabilize the program's finances. In the case of global warming, we know that wetland protections, investments in levees and changes in land use all could help prevent the ravages of rising seas from tearing up the fabric of life in densely populated urban areas.

Nonetheless, it often takes a crisis for leaders and the public to come to grips with the difficult tradeoffs that must be faced to head off these calamities. In the Netherlands, for instance, it took the collapse of dikes and the drowning deaths of nearly 2,000 people in 1953 for that country to construct a seemingly impregnable series of dams, dikes and barriers. Four decades later, it took death on a similar scale in New Orleans to bring about much needed investments in dams and levees to protect this vulnerable urban core.

Let's not underestimate the political challenges that leaders must face in convincing people to make painful choices today to head off disaster tomorrow. Preventing a future fiscal crisis will require real sacrifice today in decreased benefits and increased taxes from an aging population that has become more dependent than ever on government programs and at the same time more resistant to higher taxes. Dealing proactively with climate change may very well require not only higher taxes for new protective infrastructure but painful changes in land use. How can a political leader convince the thousands of people who enjoy living on the beaches of New Jersey and New York that they must either pay far more for flood insurance or retreat to more environmentally sustainable zones?

As real as those political challenges may be, I have no sympathy for leaders who mislead the public about the nature of the choices we face and who encourage shortsighted policies that only make the future problems worse. On the fiscal front, political leaders championing tax cuts or resisting spending reforms are only delaying the inevitable fiscal crisis--and making it worse. On the environmental front, leaders like President Obama and New Jersey Gov. Chris Christie, who announce that everyone will be guaranteed a return to their homes as they existed before Hurricane Sandy, also are perpetuating the problem.

It is no wonder that many presumably informed and enlightened people, believing that nothing will be done otherwise, pray for a crisis. One speaker at a recent budget conference suggested that the nation's leaders need a fiscal wakeup call in the form of an economic crisis that would jolt them into making the hard choices that are needed before the real fiscal disaster arrives. He likened this to a "therapeutic heart attack" that does little damage but gives the patient a timely incentive to change his or her ways.

But a crisis, by definition, is not an event we can tame or control. Crises that would be severe enough to get our collective attention would cause a level of havoc and destruction that we would not be prepared to accept.

Let's hope that we don't end up needing a crisis to force us to do the things that need to be done. Instead of praying for crises, we need to act in a timely way to prevent them.

Join the Discussion

After you comment, click Post. You can enter an anonymous Display Name or connect to a social profile.

More from Management Insights