Why The National Debt Crisis Is Way Worse Than You Think
If Washington is deadlocked now, how will it deal with the much bigger debt problems that lurk in the decades to come?
By Peter Coy
Listen to the podcast with the author - recommended
There is a comforting story about the debt ceiling that goes like this: Back in the 1990s, the U.S. was shrinking its national debt at a rapid pace. Serious people actually worried about dislocations from having too little government debt. If it hadn’t been for two wars, the tax cuts of 2001 and 2003, the housing meltdown, and the subsequent financial crisis and recession, the nation’s finances would be in fine condition today. And the only obstacle to getting there again, this narrative goes, is political dysfunction in Washington. If the Republicans and Democrats would just split their differences on spending and taxes and raise the debt ceiling, we could all get back to our real lives. Problem solved.
Except it’s not that way at all. For all our obsessing about it, the national debt is a singularly bad way of measuring the nation’s financial condition. It includes only a small portion of the nation’s total liabilities. And it’s focused on the past. An honest assessment of the country’s projected revenue and expenses over the next generation would show a reality different from the apocalyptic visions conjured by both Democrats and Republicans during the debt-ceiling debate. It would be much worse.
That’s why the posturing about whether and how Congress should increase the debt ceiling by Aug. 2 has been a hollow exercise. Failure to increase the borrowing limit would harm American prestige and the global financial system. But that’s nothing compared with the real threats to the U.S.’s long-term economic health, which will begin to strike with full force toward the end of this decade: Sharply rising per-capita health-care spending, coupled with the graying of the populace; a generation of workers turning into an outsize generation of beneficiaries. Hoover Institution Senior Fellow Michael J. Boskin, who was President George H.W. Bush’s chief economic adviser, says: “The word ‘unsustainable’ doesn’t convey the problem enough, in my opinion.”
Even the $4 trillion “grand bargain” on debt reduction hammered out by President Barack Obama and House Speaker John Boehner (R-Ohio)—a deal that collapsed nearly as quickly as it came together—would not have gotten the U.S. where it needs to be. A June analysis by the Congressional Budget Office concluded that keeping the U.S.’s ratio of debt to gross domestic product at current levels until the year 2085 (to avoid scaring off investors) would require spending cuts, tax hikes, or a combination of both equal to 8.3 percent of GDP each year for the next 75 years, vs. the most likely (i.e. “alternative”) scenario. That translates to $15 trillion over the next decade—or more than three times what Obama and Boehner were considering.
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Jul 28, 2011 at 8:33 PM
Reader Comments (15)
And mainstreet will continue to wonder why there is less money in there pockets...
I agree.
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They are now the Obama tax cuts for the rich. Remember the legislation from earlier this Spring extending them?
Aint No Fuckin Way, i would take money out of the poor workin mans pay check. Everythime a 10
5 flat tax is brought up there is a "Cut Off Line".............................
How old are you.........................Z is our little child, but that may have changed now.......................
Next Question...........................but you did make a good point, Sir, the time is now to change the way the
'Goverment-Fucks-Us".......................?
The Bush Cuts were for the ones that were tax'ed to much to cover for the ones that Cheat the system.......Bush knew the goverment over did it just like Obama Head-Less wanted to do this time.......................
So he gave them a break. Now Obama wants that money back becouse they do pay what the goverment asks.......Thats how a 10% flat tax to all buisness would take away the ones that get out of paying their share.......
But that is just my little thought on why Bush gave buisness a tax break in the first place.....Make everyone pay thAre fair share........................."sHIT", Thats not how the Fat Cat Bankers planed it, is it............Rich get a free lunch, and the upper buisness and the workin class pay the bills.....................
We dont pay 10% but were almost there. I would more than gladly pay my fair share evan if it means 2% more......... When we eat the same Human Grade Pet Food, $$$$$$$$$$ as our kittys, I will be glad to say were poor and could we get a break........?
By XXX, the richest 1 percent will own 40 percent of the nation's wealth. The bottom 93 percent will have experienced a 4 percent drop in real disposable per-capita income between XXXX. During the Bush years the total income rise was $750.00 for the average tax payer, taking into account a low factor for inflation of 3% they actually fell behind $12,000
Individual worker productivity rises an astonishing 43 percent from 1919 to 1929. But the rewards are being funneled to the top: the number of people reporting half-million dollar incomes grows from 156 to 1,489 between 1920 and 1929, a phenomenal rise compared to other decades. But that is still less than 1 percent of all income-earners.
Sounds strange but the above was talking about the cause of the Great Depression. As strange as it may seem, the way the nation got out of the Depression was to RAISE tax rates on the millionaires. When we came out of the Depression we had one of the greatest expansions in modern history lasting until the 70's. When the support for Israel led the US into another depression caused by the Oil Embargo.
Were 2 paychecks from losing our cabin. I did everything the right way. Lets see how good it feels doing it the goverment way..........My credid scores are, 789, 798, 800, now lets see how fast i can bring them down to goverment leavles.......... 000, 000, 000, that should do the trick.
I worked all my life paying my bills before i evan got them to get a score that high, lets see how good i can turn them around...... Im looking for a good used airplane now...........................