Washington’s chronic overspending problem is becoming a national emergency.
Judging by the budget he submitted to Congress, President Obama is abrogating his responsibility to provide the principled leadership we badly need to solve the problem. Instead, Congress will have to provide the leadership that the president will not. There is no more time to kick this can down the road.
In only the last decade — since 2000 — total federal spending has doubled. Last year’s level reached 25 percent of our nation’s economy — a post-World War II record and far higher than recent years have averaged. This spending surge has resulted in massive, record-breaking deficits. As recently as 2007, our deficit was only 1.2 percent of our gross domestic product. This year it is more than 10 percent, or $1.6 trillion. Our government is borrowing about 40 cents of every dollar it spends.
The recent, huge deficits have, inevitably, created a mountain of debt. Over the last 20 years, our debt had remained fairly constant as a percentage of our national output. From 1988 through 2008, federal debt averaged 41 percent of GDP. Today it’s 64 percent. It’s going to be 72 percent of GDP by October.
By the end of 2011, the debt will have more than doubled in only four years. President Obama has proposed tripling it by 2017. And, this is just a fraction of the problem that we have.
These debt figures include neither the government’s contingent liabilities nor the unfunded commitments we have taken on. Federal guarantees of just Fannie Mae’s and Freddie Mac’s outstanding obligations total $5.4 trillion, according to the Government Accountability Office.
And the unfunded commitments of the big entitlement programs — Medicare, Social Security, and Medicaid — total well into the tens of trillions of dollars.
Economists who have studied the effects of excessive debt agree that it hinders economic growth and can lead to huge, sometimes repeated, financial crises. Many believe we are already experiencing the former and are on a collision course with the latter.
Yet the president just proposed another budget that continues deficit spending as usual.
Over the next 10 years, the president’s budget adds $7.9 trillion in new spending beyond his 2011 budget, $1.4 trillion in new tax increases, and still adds $8.5 trillion to our national debt. He proposes keeping the federal government bloated at nearly 24 percent of GDP and offers no reforms for the big entitlement programs driving our future deficits. And these deficits will likely be worse than the White House projects since its budget assumes stronger economic growth, lower interest rates, and lower inflation than many economists believe likely.
This irresponsible budget comes at a time when the country is only a few months away from hitting its statutory debt ceiling. Since ongoing tax revenue will fund only 60 percent of projected government spending, Congress would have to raise the debt limit to permit more borrowing and continue down the spending path we are on.
The president and his administration have demanded that Congress raise the debt ceiling, prior to reaching it, and with no conditions attached.
That would be a big mistake. An administration that gave us an $800 billion stimulus bill; a trillion-plus-dollar health-care bill; hundreds of millions in bailouts; and that even now advocates a $50 billion high-speed-rail boondoggle, cannot be relied upon to rein in spending on some indeterminate day in the future. We need to act now.
Congress should insist on real, immediate spending cuts and substantive reforms of our broken spending process as part of any debt-limit-increase package. The House has made a good start on the former with the bill it recently passed that funds the government for the rest of this year.
As for substantive, structural spending reforms, a balanced-budget amendment to the Constitution would be an ideal fiscal straitjacket. But I would be open to other reforms including tough, statutory spending caps that would limit total spending and force Congress to live within its means.
If a family spends beyond its means for years, charging all of its excess purchases to an array of credit cards, when the family maxes out on the cards most Americans would say it was time for them to reform and cut their spending — before they got another credit card!
It should be no different for our government. Too much debt inhibits job creation now and dangerously jeopardizes our financial, economic, and even national security future. Before we authorize more borrowing, Congress should enact the reforms needed to put us back on a sustainable fiscal path despite the president’s objections. Anything less would be irresponsible.
Pat Toomey is the junior U.S. senator from Pennsylvania. Contact him via http://toomey.senate.gov/contact_form.cfm.
Posted by Pat Toomey @ 10:30 AM Permalink | 1 comment