Taming the national debt before it devours us

The U.S. government faces a historic choice over the next very few years: get our fiscal house in order or see our status as a world economic power permanently lost in an avalanche of debt. Fiscal responsibility knows no party or ideological bounds. It is neither Democratic nor Republican, liberal or conservative. If our economy falters, the consequences will be dire for us all. Our children and grandchildren will face the very real prospect of living less well off than previous generations. The American Dream of ever-growing prosperity will evaporate. Our future will look more like that of bankrupt Greece.

That’s the reality of a $14 trillion accumulated national debt and endless wrangling in Washington over how to address it. There’s only one realistic way to address this crisis. Everything must be on the table:

Discretionary spending. That’s the portion of the budget over which Congress has direct control. It includes the gamut of spending, from education to transportation to energy to defense to NASA to foreign aid to agricultural subsidies to national parks. The total of all these programs is about $1.3 trillion. But even if this part of the budget were eliminated entirely, the budget deficit would still be $300 billion, so the problem cannot be solved with cuts here alone. More is needed.

Entitlements. That’s Social Security, Medicare and Medicaid. This is where the really big costs hit over the next decade. These popular programs dwarf the discretionary part of the budget. Unless their growth is slowed, the deficit will continue to grow.
If the U.S. gets even close to the precipice of default on its national debt, look for current low interest rates to jump back up to “normal” levels. That means federal borrowing costs jumping from 2.5 percent to historic rates of 5.5 percent. Over 10 years, federal borrowing costs would rise almost $5 trillion, wiping out all the savings now being considered by the White House and Congress.