Do you love your children and grandchildren? Of course, but are you aware of the gigantic predicament hanging over their heads? It’s our enormous national debt. Unless we act soon, we will be passing this buck to them.
Those of us born before 1960 will most likely get our full Social Security and Medicare benefits. If we don’t rectify this problem, it’s possible that our children might have to settle for partial benefits, and our grandchildren even less or none.
How bad is the problem? In the years 2001-2014, we more than tripled the national debt. Starting 2001 it was $5.7 Trillion; it is now $18 Trillion (updated picture of debt clock above not available), and still growing.
How much debt is too much? No one knows for sure. Will anyone ring a bell when the U.S. reaches the point of too much debt? Will we get any prior warning from global markets? Will the U.S. suffer the same bitter consequences of too much debt like some European countries have?
What if inflation and interest rates start climbing? Our already large interest payments could double or triple, or more! Larger interest payments will wreck future budgets, and make paying down the debt incredibly difficult.
Worse, if deflation kicks in instead of inflation, we’ll have to repay the debt with more expensive dollars and it will wreak untold havoc on the economy.
Each scenario is possible and either would lead to massive business failures, layoffs, prolonged high unemployment, and declining wages. It could mean the collapse of financial markets, retirement funds invested in stocks and bonds wiped out, falling home prices, and other unimaginable calamities. It might make 2008-2009 look like a picnic.
If we really care about our offspring we need to demand that Congress set aside political differences and pass deficit reduction legislation. And they need do it in a timely fashion. Bi-partisan legislation should be enacted in early 2015, before 2016 presidential politics begin in earnest, and today’s gridlock turns into total stalemate.
The choices we face are between reducing deficits in a planned and deliberate fashion, or wait for global markets to force us to do so in a rapid and crushing manner.
Critics of deficit reduction say deficits don’t matter. Many economists disagree. Our debt is growing faster than the economy – an unsustainable path. Critics will also say our economy is still too fragile to cut spending or raise taxes. If the economy was in a tailspin I would agree, but it’s not. Now is the time to enact meaningful long-term deficit reduction, while markets are calm and the economy is stable.
John Adams, once said, “There are two ways to conquer and enslave a nation. One is by sword. The other is by debt.” If you agree, and I do, then we need to look at this problem as a national security issue. It’s a ticking time-bomb.
One viable plan is the Simpson-Bowles proposal. This proposal is four years old, so it will need to be updated, but its major tenets are still relevant: Take a long-term, still affordable approach over 25-50 years; reduce debt incrementally on a downward path relative to the economy; reform the tax code in a progressive, pro-growth manner; and cut spending across the board.
Simpson-Bowles isn’t a perfect plan, there’s no such thing. It’s filled with lots of things people don’t like – that’s the nature of deficit reduction. We’ll need to be open-minded as almost everyone’s ox will be gored.
Passing this legislation will show global markets we’re serious about deficit reduction, and protect the full faith and credit of the U.S. Government. It will also sustain America Power abroad so the U.S. can play the stabilizing and example-setting role the world wants and needs us to play.
Enacting Simpson-Bowles will promote, not disrupt, economic growth. Most importantly, it will stop our disgraceful borrowing from future generations. Before passing the torch to the next generation, we need to stop passing the buck.
My parents’ generation grew up during the Depression and helped win the Second World War. Despite difficult lives, they left the country better off and sustained the American Dream. A grateful country has dubbed them The Greatest Generation, and rightly so.
The tripling of the national debt and mortgaging our descendant’s future happened on our watch. What will be our legacy if we don’t put a long-term solution in place to resolve this colossally reprehensible financial burden? What will our children and grandchildren call our generation? My guess is the adjective will be different.