To his (partial) credit, President Obama at least acknowledged the existence of a long-term fiscal problem in last night’s State of the Union address, noting that “we have to confront the fact that our government spends more than it takes in. That is not sustainable.” But he made it sound as if getting the budget under control was little more than a single item to be checked off on the national to-do list. The word “debt” appeared in the speech exactly once.
But the mounting national debt is not just a problem. It is the problem. We are out of money. The national wallet is virtually empty, the bank account dollars are all spent, and the line of credit is about to get more expensive. All other policies—from health care to unemployment to infrastructure spending to the tax code—must be considered in the context of the debt.
Today, the Congressional Budget Office offers yet another reminder of the bleak fiscal situation:
The United States faces daunting economic and budgetary challenges. The economy has struggled to recover from the recent recession: The pace of growth in output has been anemic compared with that during most other recoveries and the unemployment rate has remained quite high. Federal budget deficits and debt have surged in the past two years, owing to a combination of the severe drop in economic activity, the costs of policies implemented in response to the financial and economic problems, and an imbalance between revenues and spending that predated the recession. Unfortunately, it is likely that a return to normal economic conditions will take years, and even after the economy has fully recovered, a return to sustainable budget conditions will require significant changes in tax and spending policies.
Under current law, deficits will total nearly $7 trillion between 2012 and 2021. Publicly held debt as a percentage of GDP is projected to rise to 77 percent over the same time period, far past the 60 percent threshold most economists believe is safe maximum, and venturing ever closer to the 90 percent mark that many experts think makes a debt crisis much more likely.
That sounds bleak. But it’s actually worse than it sounds. Those projections rely on current law rather than current policy. According to the CBO, if Congress continues to extend provisions relating to the recent tax deal, the alternative minimum tax, and Medicare’s physician reimbursement rates—all of which have already been extended over the past couple years—total deficits between 2012 and 2021 will hit $12 trillion. The nation’s debt to GDP ratio, meanwhile, will hit nearly 100 percent.
That’s a whole year’s worth of GDP swallowed up by what we owe. If it happens, it will be a product of Democrats and Republicans working together, in succession, to refuse to address the problem. It’s a recipe for crisis.
The bad news doesn't stop there, either. As Kevin Williamson notes, the CBO says Social Security is now permanently broke:
The CBO’s revenue/expenditure estimates now place the program in permanent deficit. There had been some hope that payroll taxes would recover sufficiently post-recession to put the program back into the black (the theoretical black) for at least a few more years, putting off the day of reckoning for an election cycle or more. No more: The new CBO estimates put Social Security in the red for as far as the eye can see.
In theory, Obama at least acknowledges the problem. But overall it’s not clear what, if anything, he would do to seriously confront the country's growing debt. He says he's for "cutting excessive spending wherever we find it." But when it comes to, say, Social Security, he's not for any proposal that reduces future benefits.
Last year, when asked about solutions, Obama would point to his fiscal commission. “This can’t be one of those Washington gimmicks that lets us pretend we solved a problem,” he declared in last year’s State of the Union.
But at the end of last year, the fiscal commission’s recommendations landed with no administration support. Turns out the commission was a gimmick. It may not have let anyone pretend they’d solved the problem, but it did let the administration spend a year pretending it was working on it. As with the debt problem itself, President Obama has acknowledged their work. But he has declined to endorse their solutions.
The commission, though, went away. In time, most of its proposals will be forgotten. Unfortunately, you can’t say the same about the debt.