It’s easy to look at the nation’s capital these days and conclude that the place has deserted reality, to put it mildly. While everyone obsesses about tax reform and whether that will be a net gain or loss for taxpayers, budget deficits continue to soar, the national debt piles higher, and many very real problems facing the nation go unaddressed. It’s as if the entire D.C. establishment were acting out a farce in which both parties compete to see which one can best avoid reality rather than face it.
The hard reality is that the federal deficit this past fiscal year totaled $666 billion (maybe we should call it the “mark of the devil” deficit), and the national debt is over $20 trillion and climbing. If this rate of increase isn’t slowed, the nation could face $30 trillion in debt in 10 years, according to the nonpartisan Congressional Budget Office — truly dangerous fiscal territory.
Whether the economy grows substantially or not based on what Congress does on taxes, big deficits are projected for the foreseeable future. Eventually, as outsized federal government borrowing vacuums up huge loans, the inevitable result will be that interest rates will jump, private-sector borrowing will be crowded out, consumer confidence will plummet, and the country will slip into a deep recession, one potentially steeper and harder to shake off than the last one, in 2007-09. And since as much as a third of every dollar that the federal government borrows comes from outside the U.S. (i.e., China), we would end up owing our economic soul to foreigners, who could eventually demand a day of reckoning. We may indeed find that getting into fiscal hell is easier than getting out. Think it can’t happen? See Spain, or Greece, or Italy, or France . . .
So what do our leaders say about this looming threat? Republicans say, “Don’t worry, we’ll cut taxes and hope we grow out of the crisis.” Democrats say, “Don’t worry, let’s keep spending as usual and hope we don’t go broke.” This don’t-worry-be-happy attitude of the parties must change if we’re to avoid falling off the approaching fiscal cliff. It will require a fundamental shift in partisan attitudes that have poisoned recent efforts to get our fiscal house in order. Every aspect of federal spending must be examined. No program can remain sacrosanct.
And the one area that requires most urgent attention is “entitlements,” which consume well over half of the federal budget. That means dealing with the so-called third rail of federal spending, Medicare and Social Security. This spending has been off-limits for a generation. The last time modest changes were made to Social Security was in 1983. That was done only because President Reagan and Congress had established the bipartisan National Commission on Social Security Reform in 1981. It was chaired by Federal Reserve Chairman Alan Greenspan, and its members included my former colleague Patrick Moynihan, New York’s senior senator at the time.