Let's Get Serious About Debt (originally posted April 19, 2011)
Yesterday, the bond rating firm Standard & Poor's released a gloomy report stressing that unless the President and Congress do something, and quickly, about America's long-term debt, the United States stands to have its bond rating downgraded from "AAA" (http://media.npr.org/assets/img/2011/04/18/USAAARating.pdf). What's the effect? It's pretty simple to understand, even for those of us who do not invest in bonds. With a lower rating, the U.S. will be forced to raise interest rates to attract buyers. Higher interest rates for U.S. securities translate to higher interest rates across the board, for things like small business lines of credit and mortgages. Worse, higher rates mean the country is paying more and more each year just to service its own debt.
Although it seems that nowadays we're all talking about our fiscal crisis, no one is really doing that much about it. Yes, it's true that President Obama and Representative Paul Ryan (R-WI) recently released competing versions of the future with their budget proposals. Here is the odd thing though: President Obama chartered a bipartisan commission to study the future of debt and deficits, and Representative Ryan actually served on the commission. (The National Commission on Fiscal Responsibility and Reform's full report can be found at http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf.
Both the President and Congressman Ryan are steeped in the details of the Commission's recommendations. After all, it's the President's commission and Mr. Ryan helped write the report. Yet, when it comes to proposing solutions to the American people, neither leader has shown the courage to actually say that the Executive and the Legislative branches need to sit down together with exactly one document in front of them -- the Commission report -- and figure out how we implement it. The Commission proposed reducing deficits by $4 trillion by 2020. Congressman Ryan proposes a cut of $1.6 trillion and the President proposes $600 billion. Both the President and the Congressman have 2022 in mind, not 2020, like the Commission. Congressman Ryan achieves most of his savings by revamping Medicare and Medicaid. The President achieves most savings by Defense cuts. Neither the President nor Mr. Ryan is willing to say anything about Social Security beyond "we need to think and talk about it." The Commission actually had some concrete proposals for how to restructure Social Security in both its revenue and disbursement aspects.
So here is what it seems to me: the President is telling us we need to tighten our belts, but the part of the national waistline we are going to squeeze is the Defense part. Congressman Ryan is also talking about belt-tightening, but he wants us to squeeze the Entitlements fat, and nothing else. The fact of the matter is that the biggest portions of our federal budget are Defense, Entitlements, and Social Security. Borrowing to sustain that more than 66% of our budget is what's eating our lunch, but more importantly, the lunch of our children, grandchildren, and great grandchildren.
The Right screams that Entitlements are out of control all the while contending Defense is untouchable. Nonsense. One of the easiest places to start is looking for savings is at the number of military installations we maintain in the United States. But to honestly do that, members of the Senate and the House would have to look their local constituents in the eyes and say "I voted to close Local Air Force Base to save money." That is hard to do. But the purpose of the Defense Department is to defend us, not to provide local jobs. On the other hand, the Left says we should not abandon the "safety net" for those who need it. Fair point, but the safety net is multilayered, tangled, and actually traps many of those people it is supposed to catch. Furthermore, programs are duplicative and poorly administered. Section 8 housing vouchers help people with rent and costs about $18 billion a year, but the program is administered by thousands of offices across the nation. Nebraska, my home state, has more Housing Authority offices than it has counties.
Neither the Left nor the Right wants to touch Social Security. But as the Commission reports:
"When Franklin Roosevelt signed Social Security into law, average life expectancy was 64 and the earliest retirement age in Social Security was 65. Today, Americans on average live 14 years longer, retire three years earlier, and spend 20 years in retirement. In 1950, there were 16 workers per beneficiary; in 1960, there were 5 workers per beneficiary. Today, the ratio is 3:1 – and by 2025, there will be just 2.3 workers "paying in" per beneficiary”.
If our leaders cannot get serious today, then it seems they will wait for future leaders to impose drastic austerity measures. That is what is now happening in Europe. I just think we can do better.
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