It doesn’t exactly take a genius to figure out that our current debt and deficits are indefensible. A degree in economics isn’t needed to understand that a $1.6 trillion deficit is probably unsustainable, or that a $14.3 trillion debt is almost certainly a bad idea.
It’s common sense to almost everyone that we have to spend less, and yet year after year Washington has done nothing to shut off the tap. Part of this is a willingness to put politics ahead of pragmatism, throwing money at perceived problems and bringing as much money back to their districts as possible. But recently, a new trend has developed – head in the sand syndrome. Many in Congress are now completely unwilling to look at the cost of continued spending, content instead to demagogue any attempt at cuts.
A new report by the Congressional Budget Office will hopefully snap these deficit deniers from their oblivious repose. The CBO’s “Long-Term Budget Outlook” is a truly terrifying document that lays out our budgetary path unless bold action is taken.
“Daunting” is the word the CBO chose to describe the fiscal challenges we face, although I wonder if even that undersells the true nature of our problems. Even in the most “optimistic” of scenarios (with taxes on everyone soaring to their highest levels in years, interest rates remaining low, and doctors not getting paid) the CBO predicts that our debt will grow to 84 percent of our annual economic output within the next 10 years.
While even that figure should be enough to scare Congress into immediate action, the more realistic scenario envisioned by the CBO should give us all nightmares. Using realistic assumptions they calculate that the national debt would exceed 100 percent of gross domestic product within 10 years, would exceed its WWII peak in 13 years, and would approach an astounding 190 percent in 25 years.
Imagine that for a moment. Without substantial change, our debt will approach a level twice the size of our economy. That means everyone in the United States could contribute the value of every good and service they produce for an entire year, for two straight years, just to pay off our debt.
To be honest, this worst case scenario could never happen. Long before our debt reached 190 percent of GDP our bond markets would crash, our investors would lose confidence, and we would default. And unlike Greece there is nobody that could bail us out. America is not too big to fail, but it is too big to bail out.
Despite the impossibility of a Euro-style bailout, the United States will be made to deal with its overspending problem one way or another. One involves a structured realignment in which Americans, speaking through their representatives in Washington, are able to enact reforms necessary to reduce spending to sustainable levels. The other involves default, in which our creditors will decide how we will balance our books.
To ensure that we, rather than our creditors, determine our fate, a coalition of conservative groups has begun pushing the “Cut, Cap and Balance” initiative. This three part plan involving immediate spending cuts, enforceable spending caps, and a balanced budget amendment to the Constitution, puts limitations in place to ensure that American voters are the one to dictate a plan to reduce the deficit.
It doesn’t take a genius to realize we have an enormous overspending problem. Neither does it take one to realize that Cut, Cap and Balance is the best way to ensure a permanent solution to our debt and deficits.