I am listening to the Senate Budget Committee Hearing about our budget and economic outlook. Chairman Conrad sounds stressed out about how terrible the situation is. He said he read a report this morning about what was needed to get us to a place where our debt-to-GDP ratio was back to 60 percent in 2019 and that the actions needed to do this are daunting. He is right.

The Committee seems suspicious of the president’s claim that his budget will address some of our fiscal problems. I think this is an understatement.

Senator Sessions is doing a great job stressing the point that spending is the issue, not deficit reduction, and also stressing the point that we have to address the spending issues in the short run. (The witnesses seem to argue — however mildly — that we shouldn’t try to address government spending and deficit in the short run because we could hurt the economy. Economist Donald Marron has proposed to cap debt to GDP to 70 percent by 2013).

However, the senator is right. We cannot afford to wait.

Senator Sessions also asked about the risk of Washington trying to get out of this debt cycle by monetizing the debt. “Monetizing” debt should be seen for what it is: robbery on the grandest scale. Rather than repaying what it has borrowed, a government resorts to printing up extra currency and using it to pay its bills and loans. The debt is in effect transformed into an increase in the money supply, not matched by an increase in the demand for money. It lowers the purchasing power of our money, and of everyone’s savings. This is called inflation (the curse of entrepreneurs and productive people.)

Marron answered by explaining why this solution wouldn’t actually work that well for the United States. Point taken. However, the fact that it wouldn’t be a good idea doesn’t mean that lawmakers won’t do it anyway. And the senator’s question remains unanswered.

Finally, Senator Sessions is asking a key question. We don’t have a full picture of what our true debt burden is since there are many hidden debts. As he notes, all our debts (held by the public and gross debts) have to be repaid and the money has to come from current income.

Interestingly, Marron responded that gross debt actually understates how critical and dangerous our current trajectory is.