US Must Address Debt, Warns Debt Commission
President Obama’s bi-partisan debt commission gave a preliminary read out of the nation’s fiscal situation today. There was nothing earth shattering about the conclusion. The prognosis from co-chair Erskine Bowles is that current trends will destroy the country from within. I think Bowles is actually a bit off on that one as the holders of the debt and the bond vigilantes will take care of the destruction; it’s just that our congress has given them an assist.
I once read that people should always insist that they be taxed for everything the government proposes to do. That sounds harsh, but it’s really the only way you can truly feel the cost of entitlements, wars, wild defense appropriations and etc. Of course, along with being taxed, I’d argue that citizens would have to insist on sound monetary policies as well. In other words, no more printing of dollars to create inflation to pay off old debts. The true cost of everything that was promised to us or committed to the military industrial complex was masked by debt creation, money creation or both.
The only reason why this is coming to an end is the diminished ability to continue to do both. In the face of impending discipline to be imposed the markets, we now have a commission that’s been formed to recommend hard choices; the sort of choices that our politicians have been wont to make and that we’ve been wont to accept.
To be sure, as I’ve said here many times before, times are about to become far different than what we’re accustomed to and there’ll be new challenges for all of us. That’s not all bad however, because at some point this also means that the old left-right political paradigm will pass. Supply side economics will be seen as hubris along with unbridled Keynesianism. In the place of both will come philosophies revolving around fiscal and monetary soundness. From that necessarily arises new foreign and domestic policies that align with the new philosophy. We have no choice in this matter as we won’t be able to afford anything else.
Debt commission leaders paint gloomy picture
By GLEN JOHNSON, Associated Press Writer Glen Johnson, Associated Press Writer Sun Jul 11, 9:30 pm ET
BOSTON – The heads of President Barack Obama’s national debt commission painted a gloomy picture Sunday as the United States struggles to get its spending under control.
Republican Alan Simpson and Democrat Erskine Bowles told a meeting of the National Governors Association that everything needs to be considered — including curtailing popular tax breaks, such as the home mortgage deduction, and instituting a financial trigger mechanism for gaining Medicare coverage.
The nation’s total federal debt next year is expected to exceed $14 trillion — about $47,000 for every U.S. resident.
“This debt is like a cancer,” Bowles said in a sober presentation nonetheless lightened by humorous asides between him and Simpson. “It is truly going to destroy the country from within.”
Simpson said the entirety of the nation’s current discretionary spending is consumed by the Medicare, Medicaid and Social Security programs.
“The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans, the whole rest of the discretionary budget, is being financed by China and other countries,” said Simpson. China alone currently holds $920 billion in U.S. IOUs.
Bowles said if the U.S. makes no changes it will be spending $2 trillion by 2020 just for interest on the national debt.
“Just think about that: All that money, going somewhere else, to create jobs and opportunity somewhere else,” he said.
Simpson, the former Republican senator from Wyoming, and Bowles, the former White House chief of staff under Democratic President Bill Clinton, head an 18-member commission. It’s charged with coming up with a plan by Dec. 1 to reduce the government’s annual deficits to 3 percent of the national economy by 2015.
Bowles led successful 1997 talks with Republicans on a balanced budget bill that produced government surpluses the last three years Clinton was in office and the first year of Republican George W. Bush’s presidency. Simpson, as the Senate’s GOP whip in 1990, helped round up votes for a budget bill in which President George H.W. Bush broke his “read my lips” pledge not to raise taxes.
Despite their backgrounds, both Simpson and Bowles said they were not 100 percent confident of success this time around.
Simpson labeled the commission members “good people of deep, deep difference, knowing the possibility of the odds of success are rather harrowing to say the least.”
Bowles also said Congress had to be ready to accept the commission’s findings.
“What we do is not so hard to figure out; it’s the political consequences of doing it that makes it really tough,” he said.
Arkansas Gov. Mike Beebe was one of those leaders who sat in rapt attention during the presentation, one of the first in public by the commission leaders.
“I don’t know that I ever heard a gloomier picture painted that created more hope for me,” said Beebe, commending its frankness.