Today's report from the non-partisan Committee for a Responsible Federal Budget is a sobering read:
“Public debt” refers to the portion of the debt not held by the government in its various trust funds.
The solution, the report states, must revolve around reforms to “programs that are growing faster than the economy — notably Medicare, Medicaid, Social Security, and certain tax policies.” (The latter is identified elsewhere as the tax cuts of 2001 and 2003.) These cheery-eyed suggestions are the most frightening part of the report. They are so obvious, and they have so little chance of being put into effect.
The current Democratic Congress is always happy to lean harder on the taxpayer, but that well is pretty shallow and already running dry, and higher taxes will not help the cause of future growth. And as for the entitlement reforms — the most important part of any fiscal solution for the U.S. government — widespread dependency on entitlements has made reform politically impossible. Republicans were turned back by the special interests blocking Social Security reform in 2005. Democrats' planned cuts to Medicare have made senior citizens the strongest opponents of President Obama's planned health care reforms.
What does a fiscal crisis look like? The report offers a few small hints:
Well before the debt approaches such startling heights, fears of inflation and a prospective decline in the value of the dollar would cause investors to demand higher interest rates and shift out of U.S. Treasury securities. The excessive debt would also affect citizens in their everyday lives by harming the American standard of living through slower economic growth and dampening wages, and shrinking the government's ability to reduce taxes, invest, or provide a safety net.
The national path of least resistance leads to that or something like it, and neither party seems equipped or prepared to prevent it.