Ryan also is bracingly candid about the cost of staying on today’s trajectory of rising outlays, deficits, and debt. Between now and 2021, when national debt rises from 70 percent to 87 percent of gross domestic product, foreign lenders may tire of renewing Uncle Sam’s credit card. China, highly distracted Japan, and others may extend credit but boost interest rates, much as U.S. banks treat risky consumers. Elevated borrowing costs will slow today’s modest economic upswing, consequently curb federal tax revenues, and thus lift demand for even more borrowing to absorb the resulting red ink. This would mean even higher interest rates to entice overseas financiers, and so on. Soon, America will hit the wall.
“No entity on the planet is large enough to bail out the U.S. government,” Ryan warns. “Absent a bailout, the only solutions to a debt crisis would be truly painful: massive tax increases, sudden and disruptive cuts to vital programs, runaway inflation, or all three. This would create a huge hole in the economy that would be exacerbated by panic.” The document adds: “The government’s failure to prevent this completely preventable crisis would rank among history’s most infamous episodes of political malpractice.”
Rep. Paul Ryan asks a question whose answer will unfold vividly in the days and weeks ahead: “Will this be remembered as the Congress that did nothing as the nation slouched toward a preventable debt crisis and irreversible decline? Or will it instead be remembered as the Congress that did the hard work of preventing that crisis — the one that chose the path to prosperity?”
— Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.