It doesn’t exactly take a genius tofigure out that our current debt and deficits are indefensible. A degree ineconomics isn’t needed to understand that a $1.6 trillion deficit is probablyunsustainable, or that a $14.3 trillion debt is almost certainly a bad idea.
It’s common sense to almost everyonethat we have to spend less, and yet year after year Washington has done nothingto shut off the tap. Part of this is a willingness to put politics ahead ofpragmatism, throwing money at perceived problems and bringing as much moneyback to their districts as possible. But recently, a new trend has developed –head in the sand syndrome. Many in Congress are now completely unwilling tolook at the cost of continued spending, content instead to demagogue anyattempt at cuts.
A new report by the CongressionalBudget Office will hopefully snap these deficit deniers from their obliviousrepose. The CBO’s “Long-Term Budget Outlook” is a truly terrifying documentthat lays out our budgetary path unless bold action is taken.
“Daunting” is the word the CBOchose to describe the fiscal challenges we face, although I wonder if even thatundersells the true nature of our problems. Even in the most “optimistic” ofscenarios (with taxes on everyone soaring to their highest levels in years,interest rates remaining low, and doctors not getting paid) the CBO predictsthat our debt will grow to 84 percent of our annual economic output within thenext 10 years.
While even that figure should beenough to scare Congress into immediate action, the more realistic scenarioenvisioned by the CBO should give us all nightmares. Using realisticassumptions they calculate that the national debt would exceed 100 percent ofgross 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. Withoutsubstantial change, our debt will approach a level twice the size of oureconomy. That means everyone in the United States could contribute the value ofevery good and service they produce for an entire year, for two straight years, just to pay off our debt.
To be honest, this worst casescenario could never happen. Long before our debt reached 190 percent of GDPour bond markets would crash, our investors would lose confidence, and we woulddefault. And unlike Greece there is nobody that could bail us out. America isnot too big to fail, but it is toobig to bail out.
Despite the impossibility of aEuro-style bailout, the United States will be made to deal with its overspendingproblem one way or another. One involves a structured realignment in whichAmericans, speaking through their representatives in Washington, are able toenact reforms necessary to reduce spending to sustainable levels. The other involvesdefault, in which our creditors will decide how we will balance our books.
To ensure that we, rather than ourcreditors, determine our fate, a coalition of conservative groups has begunpushing the “Cut,Cap and Balance” initiative. This three part plan involving immediatespending cuts, enforceable spending caps, and a balanced budget amendment tothe Constitution, puts limitations in place to ensure that American voters arethe one to dictate a plan to reduce the deficit.
It doesn’t take a genius to realizewe have an enormous overspending problem. Neither does it take one to realizethat Cut, Cap and Balance is the best way to ensure a permanent solution to ourdebt and deficits.