When explaining the dangers of America’s ballooning national debt, fiscal conservatives unwittingly sabotage their cause by invoking “the children.” They should spend lots more time discussing how federal red ink harms adults today.
Tying debt reduction to future generations causes two problems:
First, if America’s children will pay off the national debt, why sweat it now? Washington’s spendaholics will clutch at any available excuse to keep federal spending grinding forward. If the debt only will vex America’s kids, it clearly needs no attention for another decade, maybe two. So, until then, PARTY!
Second, millions of American adults don’t possess children. Some have not had them. Others don’t want them. While speeches about “the children” may play moms and dads like fiddles, they barely pluck the heartstrings of the childless.
Free marketeers, thus, should add a badly needed note of urgency to their overtures on the national debt. Historic and current federal borrowing hurts American adults — and this entire economy — right now, well before little Johnny and Sally turn 21, find jobs, and start signing the tab for Washington’s endless fiscal happy hour.
For now, the good times are rolling.
After the Bush-Rove administration’s fiscal bacchanal, when President Obama took office, the gross federal debt was $10.6 trillion. Today, that figure is $15.4 trillion — and climbing. Senator Rob Portman (R., Ohio) — a former White House budget chief — expects Uncle Sam to crash through today’s $16.4 trillion debt ceiling in mid-October, weeks before the November election. According to the Congressional Budget Office’s January 2012 Budget and Economic Outlook, the debt will total $21.7 trillion in 2022.
Servicing this debt will be a massive national enterprise. Net interest payments will soar from $224 billion to $624 billion in 2022 alone. Over the next 10 years, the CBO projects that interest paid to bondholders will cost $4.25 trillion. This is nearly double the expected budget for Obamacare!
“This debt cloud over our economy is depressing growth right now,” said Alabama’s Jeff Sessions, the U.S. Senate Budget Committee’s top Republican. Sessions cites economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard. After examining 44 nations across 200 years, they determined that advanced nations with gross-debt-to-GDP ratios above 90 percent experience median growth rates one to two percentage points lower. Slower growth means fewer jobs, lower incomes, and grimmer people. America’s debt/GDP ratio equals 105 percent today, well into that danger zone. Obama’s budget keeps that figure above 102 percent through 2022.
“The nation’s debt is leading to higher costs for businesses and American households to obtain long-term credit,” states a May 2011 report by Senator Sessions’s budget analysts. “Longer-term interest rates would be even lower today, and more stimulating of economic activity, if today’s deficit and government debt were lower.”
The disgraceful debt has potential security implications. Beyond the national embarrassment of Standard & Poor’s well-deserved downgrade of U.S. bonds, America may have to bow before overseas lenders. “We have a treaty that says if China attacks Taiwan, we’re supposed to defend Taiwan,” Erskine Bowles, President Clinton’s former chief of staff, observed. “But to do that we’d first have to borrow the money from China.”
Federal Reserve chairman Ben Bernanke also sees the national debt menacing today’s adults. “Expectations of large and increasing deficits in the future could inhibit current household and business spending,” he said in October 2010, “for example, by reducing confidence in the longer-term prospects for the economy or by increasing uncertainty about future tax burdens and government spending — and thus restrain the recovery.”