A new stimulus package looks iffy before Congress adjourns this year, but President-elect Barack Obama clearly wants one after his inauguration.
The truth is, with the retail and manufacturing sectors joining the list of declining industries, there’s a case to be made for Washington trying again to stimulate the economy. Public works jobs will have only limited benefit, but those of us in the deficit-hawk camp need to stay flexible about priming the pump. Getting out of our financial hole is a greater worry than watching budget deficits race toward $1 trillion because of the pump priming.
But there must be a trade-off if Washington goes back down the stimulus path. In return for layering on more debt, which a stimulus package would do, the new president and Congress simultaneously should create a commission to work on America’s addiction to debt.
I must confess this debt talk sounds awfully puritanical. Obama’s inauguration represents one of the most important shifts in American culture. Bringing up the debt right now is like being the guy at the wedding who wants to know how much the reception costs.
But somebody has to ask questions. We can’t keep adding more debt without encountering problems.
China and other purchasers of our treasury offerings, which we issue to finance our annual deficits, easily could look at future offerings and say no thanks. They reasonably could see America as a bloated thoroughbred that’s ultimately the wrong horse to bet on.
Some numbers may better make the point: As I have noted in recent columns, the federal debt is on track to grow to $53 trillion, which translates to about $455,000 per household.
To be clear, that figure is 10 times the median annual income of the average household. And before you think, “Well, let’s just wipe out the Bush tax cuts, end spending for our two wars and get rid of every earmark,” those actions would get us only 16 percent of the way toward wiping out that $53 trillion monster. (For more information about the federal debt, go to the Peter G. Peterson Foundation site at pgpf.org.)
A word here about deficits vs. debt. Deficits record only yearly excesses in spending; the debt is the accumulation of all of our deficits. That’s the figure we owe creditors, and it’s racing out of control because of the cost of entitlement programs.
Hence, the need for this commission to start with Medicare. The unfunded promises to our health care system for seniors run up to $34 trillion. And the bills will arrive soon. Medicare’s hospital trust fund runs out of cash in a decade.
Michael Leavitt, the health and human services secretary, is one who wants to reform Medicare in the way Congress once shut down unnecessary military bases. A bipartisan commission suggested a list of base closures to the president and Congress. They could approve or deny the list, but if they turned it down, a pre-determined number of bases automatically shut down.
Leavitt and others, including John McCain, envision something similar for Medicare. A commission would present President Obama and Congress reforms to keep Medicare solvent. If they reject the list, a backup set of reforms goes into place.
Fortunately, some members of Team Obama get the need for something like this. His economic Sherpa, Paul Volcker, was among the economic and political heavyweights who signed a two-page New York Times ad in September that drew attention to the federal debt. Their recommendations included a “fiscal responsibility commission.”
Here’s hoping Volcker persuades Obama to link our current financial problem with the one that awaits us. Here’s hoping Washington focuses as much on getting us out of debt as it does on revving up the economy.
— William McKenzie is an editorial columnist for The Dallas Morning News. His e-mail address is firstname.lastname@example.org.