Archive for Saturday, December 19, 2009

National debt demands strong action

December 19, 2009


— The 34 names are familiar to anyone who has followed economic policy in Washington for the past generation, one-third of them former chairmen or members of key committees of Congress, seven of them former directors of the White House Office of Management and Budget, two of them former comptroller generals of the United States, seven of them former directors of the Congressional Budget Office and one of them — Paul Volcker — the former chairman of the Federal Reserve System and now an adviser to President Obama.

Both political parties are well represented in their number. But they came together this week as signatories of a nonpartisan manifesto, essentially a stark warning to the president and Congress and a plea for action on behalf of the next generation.

The United States, they unanimously said, is facing “a debt-driven crisis — something previously viewed as almost unfathomable in the world’s largest economy.”

Under the impact of the worst economic calamity since the Great Depression, the federal government ran a deficit of $1.4 trillion this past year. The rescue effort was necessary, but in 2009 alone, the public debt grew 31 percent from $5.8 trillion to $7.6 trillion, rising from 41 percent to 53 percent of gross domestic product (GDP).

Unless strong remedial steps are taken, in the years just ahead, the debt is projected to rise to 85 percent of GDP by 2018 and 100 percent four years later. By that time, barely a dozen years from now, these sober-sided, deeply experienced folks say, the American economy will likely be in ruins.

All of us have become accustomed to hearing lamentations — or partisan accusations — about the changes in the annual budget deficits, the gap between federal revenues and spending in a particular year. But this commission deliberately shifted its focus from the deficit to the underlying debt.

The reason was explained to me by one of the Democrats, Alice Rivlin, formerly a director of both the Congressional Budget Office and the Office of Management and Budget. “Previously, when we were worried about deficits, we could take comfort in the fact that the debt was not very high relative to the economy,” she said. “But now that debt has shot up. The cushion has gone. If the same thing (a severe recession) happened again, we wouldn’t be able to borrow to deal with it.”

In addition to robbing us of the flexibility to deal with future crises, the rapidly rising debt level could push up interest rates, threatening economic recovery, slow the growth of wages, depress living standards, make the United States even more dependent on foreign lenders and leave us vulnerable to a shock wave if those lenders lose confidence in our ability to repay the loans.

To avoid those consequences, these experts — writing under the auspices of the Peter G. Peterson Foundation, The Pew Charitable Trusts and The Committee for a Responsible Federal Budget — suggest a series of steps.

First, they want Obama in his State of the Union address to urge Congress to join in a pledge to stabilize the debt, at no higher than 60 percent of GDP, by 2018. (Remember, it is 53 percent now.) This would require actions by both Congress and the administration to start reducing the projected annual deficits, which add to the debt, starting in 2012.

That would make debt-management an economic priority once the effects of the current severe recession have eased. To assure the pledge is kept, those who signed this report would ask Congress and the president to set up an enforcement mechanism that would automatically reduce spending or increase taxes when the debt target is missed in any year between 2012 and 2018.

This is stiff medicine, but the message of this report is that temporizing on this issue poses such perils to the nation’s future that the risk is unacceptable.

When Congress this week ducked its responsibility again by deciding to enact a temporary, two-month increase in the debt ceiling, the need for a shock treatment like this report could not be plainer.


Richard Heckler 5 years, 11 months ago

David Broder,

What will be done about this crap that keeps coming back to haunt us?

The republican party are masters at putting millions upon millions upon millions of people out of work. All they do with a remarkable degree of consistency is wreck the economy,initiate huge movements of shipping jobs abroad aka the Reagan-Bush Global Economy and try to wreck social security and medicare.

Is there a definite pattern? Absolutely!

  1. The Reagan/ Bush Home Loan Scandal

  2. The Bush/Cheney Home Loan Scandal

  3. What did Bush and Henry Paulson do with the bail out money?

  4. Why did GW Bush Lie About Social Security?( This would cost taxpayers $4 trillion and wreck the economy)

  5. Still A Bad Idea – Bush Tax Cuts

All of the above displays reckless economic behavior that which drains the cookie jars. Now the only way to get them revenues back is to take them back.

Richard Heckler 5 years, 11 months ago

David Broder with all due respect until the government steps up and creates new industry that cannot be outsourced that will put 16 million americans back to work making real money, how in the world do you expect to develop a strong sustainable economy?

Why should the government set up new industry? The government promoted outsourcing,hostile takeovers,leveraged buyouts and creative financing that has put millions upon millions upon millions out of work. Then provided a tax break for goods manufactured abroad on top of that. Wreckanomics is dumb economics.

The "shop till you drop" economy requires people making real money and that type of economy stimulates wasteful lifestyles. The "shop till you drop" economy simply is not sustainable.

just_another_bozo_on_this_bus 5 years, 11 months ago

Hmm, merrill posts actual content. Thing posts schoolyard taunts. Now who needs a brain for Xmas?

lctchr1 5 years, 11 months ago

This article is right on. Our elected officials need to get their act together. We have had years and years of fiscal irresponsibility, it is going to catch up to us at some point.

just_another_bozo_on_this_bus 5 years, 11 months ago

There is absolutely nothing wrong with the government occasionally running deficits. In a sane world, those deficits would be investments upon which a reasonable return can be expected-- large enough to pay off those debts in a reasonably short period of time. But rather than getting something actually useful for those deficits, what we mostly get is well-funded corporate pork.

Commenting has been disabled for this item.