Mike Klein Online

“Nobody Is Going to Bail Out The United States of America”

Mike Klein

You can forget about paying off the national debt.  You can also plan to work longer, earn less, pay higher (perhaps much higher) federal income taxes and receive less government support in your old age.  That is the optimistic scenario, the outcome you should expect if Washington politicians make tremendous strides soon toward solving the nation’s enormous fiscal deficit.

That was the blunt assessment Tuesday evening this week at Kennesaw State University when students, faculty and everyday citizens were treated to something pretty special – 90 minutes of truth talk serum about America’s messed up finances from a bipartisan panel of the nation’s most highly regarded conservative and liberal economic thinkers.

Shock and awe came first.  Concord Coalition executive director Robert Bixby alluded to “trillion dollar deficits as far as the eye can see.”  Former U.S. Comptroller General David Walker told one student who asked a question that he should expect federal taxes to go up 15-to-20%. Former Federal Reserve Board vice chair Alice Rivlin said America could be on the road to becoming “a much less prosperous economy and a country with much less influence around the world.”

Imagine this, conservatives and liberals sitting down together in public to focus on solutions to a federal government spending crisis that threatens to mortgage the nation’s assets to foreigners, cripple our domestic economy, further destabilize federal spending and leave generations of unborn Americans paying for today’s mistakes until they, too, are old and withered.

That not-so-pretty picture is why Concord Coalition fiscal sanity proponents continuously travel the country with their Fiscal Solutions Tour that brings bipartisan thinkers to town hall meetings.

Walker and Rivlin understand the good, the bad and the ugly of Washington.  Walker served as U.S. Comptroller General for nearly a decade that spanned the Bill Clinton and George W. Bush administrations.  Rivlin was White House budget director under Clinton before she became Federal Reserve Board vice chair.  Rivlin served on two prominent national debt reduction commissions last year.

“The public is starved for two things, truth and leadership.  They don’t get enough of either one,” said Walker.  “It’s not a partisan issue either.  There is not a party of fiscal responsibility.”

Walker is founder and CEO of the Comeback America Initiative.  He pointed out that per capita spending today is 50% higher than during World War II.  “I would argue we got something for that deficit in World War II.  I would debate what we are getting today.”

Rivlin predicted federal debt could reach an unworkable 70% of gross domestic product this year and then go higher.  “We could find any time in the next couple, two or three years, that there came a day when our creditors did not want to go on lending us money, or only at much higher rates,” Rivlin said.  “Then paying interest itself becomes a very large problem.”

The current federal budget includes $200 billion per year to satisfy interest payments. Half of the debt obligation is held overseas, much of it by Japan and China.  The Congressional Budget Office estimates the annual debt interest payment could become $800 billion within ten years.  The Concord Coalition estimate places it even higher, at more than $1 trillion per year.

Concord Coalition executive director Bixby described today’s $1.6 trillion annual federal budget deficit as “a moral issue, something about the legacy that we are leaving future generations.”  He said aging baby boomers combined with health care costs “rising faster than the economy for several decades” could make it “impossible to get the deficit under control.”

The federal budget has undergone a seismic shift.  Defense spending dominated during the Vietnam War years.  Today social spending dominates, primarily cost associated with Medicaid and Medicare, and to a lesser extent, with Social Security.  Walker said discretionary spending was 62% of the federal budget 40 years ago; today it is 38% and it could become 18% by 2040.

Armed with road show power points, Walker said U.S. government total debt now exceeds some of the most financially troubled countries in Europe.  “Greece has the (European Union) to bail them out,” Walker said.  “Nobody is going to bail out the United States of America.”

Rivlin and former New Mexico Republican Sen. Pete Domenici headed the Bipartisan Policy Center task force last year that recommended 60% spending cuts and 40% tax increases to trim the deficit $14.5 trillion by 2025.  Rivlin also served on President Barack Obama’s national deficit reduction commission.  She supports lower income tax rates, a national sales tax coordinated with states, Medicare reform and sizable Social Security benefit reductions.

Nothing about such a course will be pleasant but Rivlin remains convinced Americans are ready to face economic reality.  “I don’t think if we wait until the next presidential election that we will be any better off.   We might end up with a Republican President and a Republican Congress and that would make it less likely to get a bipartisan solution.”  She added, “Let’s do it now.”

Mike Klein is Editor at the Georgia Public Policy Foundation.

March 3, 2011 - Posted by mikekleinonline | Uncategorized | Alice Rivlin, Comeback America Initiative, Concord Coalition, David M Walker, Federal Reserve Board, Fiscal Solutions Tour, Georgia Public Policy Foundation, Mike Klein, Robert Bixby