For years we’ve been talking about the consequences of our burgeoning debt and our lack of political will. Now at least some of us are getting scared. Moody’s, Standard & Poor’s, the Chinese and Russians, the rioters in Greece, and our Medicare actuaries have finally gotten our attention. Dusty lessons of history have new meaning.
We remember that the fall of great empires has often been the result of isolated, unforeseen events that in other times and circumstances would have been inconsequential. After years of warnings by green-eyeshade types that our path is “unsustainable” (the most used and ignored word in the Washington lexicon), the word has new significance, if not better understanding.
Now come two of our country’s most respected economists — Martin Feldstein (chairman of the Council of Economic Advisors under Reagan and now a professor at Harvard) and Larry Lindsey (who served in the administrations of three presidents and on the Federal Reserve Board) — to tell us that things are even worse than we thought in terms of our economic standing.
Feldstein tells us that the drop in GDP growth in the first quarter to just 1.8 percent understates the extent of the decline. Others look at our entitlement trajectory, which will soon consume all government revenues, making our government little more than an insurance company with an army (presumably to put down domestic riots). Others point to our debt as a percentage of GDP; some think the figure will reach 100 percent by the end of the decade. Of course, the experts can’t tell us when these things will happen. We only know that they will underestimate the bad news. Twenty years after Medicare was launched, the costs of the program were approximately nine times the original projections.
Everybody has his favorite statistic or indicator that our country is going to hell in a handbasket, and Lindsey has provided mine. Thanks to Fed policies, Uncle Sam, the world’s biggest borrower, is today able to borrow at an average cost of 2.5 percent. But the average borrowing cost over the last three decades was 5.7 percent. If the economy grows and interest rates normalize, the added interest costs in 2021 alone will be $800 billion — “more than 20 times the mere $37 billion in budget cuts that tore up Congress in March. It would take virtually all of the cuts just to cover that added interest, much less start bringing down the national debt,” Lindsey writes.
So, the good news of an economic recovery would break the Treasury. Even without this budgetary disaster, Lindsey, who is not given to hyperbole, predicts that after budget negotiations conclude we will still be hitting deficits averaging $800 billion a year, which will leave America looking “a lot like Greece three to five years hence.”
Clearly this is about more than the fight over spending reductions. We won’t come close to doing what is necessary while Obama is president, and especially while he has one house of Congress. Current negotiations on Capitol Hill are about to prove this point again. But this is also about more than winning the elections next year. We must win the argument upon which the necessity for spending reductions is based. I disagree with those who say that Republicans should put our political chips on the current bad economy and shy away from controversial truths such as those contained in the Ryan proposal. But let’s be clear: Even under the rosiest conditions — and even accepting the Lindsey analysis — the Ryan plan can be only part of America’s survival strategy.
Economic numbers fluctuate. The principles on which our economic salvation rests do not.
Suppose Republicans win next year because we are “not the other guys.” Then what? Winning is necessary but not sufficient to save our country from fiscal disaster. Two years later the Democrats will still be offering free stuff and the postponement of pain. We can’t win the several subsequent elections that will be necessary to put us on the right path unless we win the war of ideas and develop the ability to explain why restraint and reform are necessary and that fostering a nation of free people, free markets, and the rule of law is not only morally just and right but is the only way to sustainable growth and prosperity. Otherwise, we become participants in our own demise, for the sake of short-term political expedience.
— Fred Thompson, who represented Tennessee in the U.S. Senate from 1994 to 2003, is an actor, lawyer, and political commentator. His weekly commentaries also appear on his site, Fred Thompson’s America.