Having scanned yesterday’s AP piece about the national debt, I regretfully report there is no good news. The article’s opening sentence is, "The national debt has hit $9 trillion for the first time." That gem of disconsolation has its counterweight in the essay’s last line, a historical reminder emphasizing the enormity of America’s recent red ink, "It took the country from George Washington until Ronald Reagan to reach the first $1 trillion in debt." At this rate of deficit spending our enemies need only wait for us to rot from within as the American economy is sunk by unprecedented profligate spending. Like the ancient Romans, we have become our own worst enemy.
For decades the Federal government has operated within a debt limit. Enacted in 1941, the debt ceiling was intended to curb unnecessary deficit spending, a nice idea. But, lawmakers have made a mockery of the law’s objective by simply raising the debt limit whenever the national debt threatened to exceed it. Just last month "Congress passed and President Bush signed into law an increase in the government’s borrowing ceiling to $9.815 trillion," adding more than $800 billion of potential debt. At the average rate of borrowing over the last five years — nearly $1.5 billion per day — Congress will again need to raise the borrowing roof within two or three years. Given the government’s track record of fiscal irresponsibility, another increase is only a matter of time.
As a nation, says author Peter G. Peterson, we are running on empty, amassing obligations we may never be able to repay. In 2006, for goodness sakes, we paid $406 billion in interest on the national debt. When the gargantuan notes are called in, as they someday surely will be, the economic consequences will likely be severe. Signs of impending economic shockwaves may be appearing already. The dollar, once the global standard of strength and stability, has plummeted to all-time lows. Soaring oil prices can only hurt the nation’s economy and in ten years, given the projected growth of oil consumption as opposed to oil production, we may long for the good old days of $100-per-barrel prices.
Everyone agrees something must be done, and there is also universal concurrence that starting to fix our economic woes sooner is better than later. Economists worry waiting too long to begin correcting our spendthrift ways will lead to a "hard" economic landing. If you don’t know what that means, you are blessed. Still, neither political party has shown the slightest inclination to limit spending. Democrats revel in pointing out Ronald Reagan and George W. Bush presided over enormous increases in spending and debt, and they are right. But Democrats fiercely refuse to cut entitlement outlays and are eager to propose additional spending. For instance, when President Bush placed into law Medicare Part D, the prescription drug benefit for seniors, Democrats howled it was not enough, even though the program is so laden with unfunded liabilities government economists struggle to pin point any upper limits on costs. All agree multiple trillions will be expended for this single program over the next twenty years. Clearly, neither party has what it takes to quit spending money we don’t have.
How to fix the problem you ask? America’s current debt and future unfunded liabilities are so huge we cannot grow our way into the black. Increasing tax rates may generate more tax revenue, but tax revenue — the money flowing to government, i.e. government income — always grows; income is not the problem. Federal receipts during President Reagan’s last year in office were double those of his first year, yet spending grew even faster. We cannot tax, wish, ignore, or talk our way out of our financial mess. The only solution is for government to spend less, a lot less. Enormous budget surpluses are necessary just to fulfill current entitlement obligations.
A sea change of government policy is needed, one reflecting this sentiment expounded by Thomas Jefferson: "I am for a government rigorously frugal and simple, applying all the possible savings of the public revenue to the discharge of the national debt; and not for a multiplication of officers and salaries merely to make partisans." Oh Tom, we need you now.
