The Urgency of the U.S. Debt Problem

 

In Friday’s Wall Street Journal Kimberley Strassel has a column “Rebooting the Budget Talks” which discusses a new approach to budget planning being taken by Wisconsin Senator Ron Johnson, a Republican.  Mr. Johnson wants to go beyond the usual 10 year budget planning by using 20 and 30 year projections from the Congressional Budget Office for both tax revenue and spending.  Even assuming that current federal government spending grows only by population growth plus inflation (which would require unusual restraint), by 2043 the national debt will have increased by $72 trillion, with public debt (on which interest is paid) amounting to 139% of GDP.  See “Thirty-year deficits and debt” for more detail.
Of course, it is easy to say that 30 year projections are way too long to have real credibility, and so let’s just stick to the usual 10 year projection which shows the public debt shrinking from today’s 75.1% to 73.6% in 10 years and so therefore becoming “stabilized”.  Most of us old folks will be gone but today’s young and middle aged people will still be around 30 years from now and so should be very much concerned about our likely fiscal condition in 2043.  And the CBO 30 year projection assumes such unlikely restraint that the debt will probably be even greater by then.
The reason why a 30 year projection is so much worse than a 10 year projection is because  the entitlement explosion is much greater in the out years compared with just the next 10 years alone.  Conclusion: the mild restraint on entitlement growth (such as a chained CPI) being reluctantly offered by Democrats today is an entirely inadequate way to curtail entitlement growth for the long haul.  Let’s get real and propose real solutions to our nation’s urgent fiscal problems.  We’ve been kicking the can down the road for way too long already.  We can no longer afford to postpone significant action until some future date when conditions are more amenable for reform.  We must act now!

2 thoughts on “The Urgency of the U.S. Debt Problem

  1. The horrible reality is America will keep kicking the can down the road until some type of a financial crisis forces her to take action. The public is drunk on entitlements — that is why Obama got elected; the public was voting itself a free lunch. If austere measures were taken today that forced any noticeable reduction in entitlements, the public would come unglued. Look at Greece! That part of America that voted for Obama will will be out in the streets rioting and immediately vote the entire austerity crew out of office pronto. Politicians being aware of this will preach posture fiscal responsibility and crank out rhetoric making it sound like action is right on the verge of being taken. They are doing this preaching, posturing and rhetoric today, but no significant action can be taken. No action will be taken. At least not until the pain of the fiscal irresponsibility becomes so great that a cut in entitlements becomes the lesser of the evils. We’re not there yet. I think we’re years away because America still has credit to spend, inflation to foment, the dollar is still the world’s reserve currency, international gas and oil purchases still need to be made with dollars and we can always print more dollars. Only when all these options have been expended and America has sobered up, only then will the debt be dealt with in a serious way. Until then, there will always be some politician selling us a way out of debt with more spending and preservation of the status quo, kicking the can down the road.

  2. You are anticipating the future and I am hoping to avoid that very same future. The only difference between us is that I think the worst of what you foresee is avoidable. It will be a huge struggle to turn things around but I believe that it is still possible. How do we get this done? By continuing to beat the drums, just like we’re doing now, until enough people wake up and insist on changing course.
    Thanks for your help!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s