Eighteen people have been working this year to save the country from financial ruin. Important as their job is, their meetings have taken place in relative obscurity. They don’t get much media attention. The bipartisan national debt commission will make its recommendations to Congress on Dec. 1, after the mid-term elections. The danger is that whoever controls Congress will lack the political courage to act on the commission’s findings.
The looming debt crisis demands attention; it has even helped to spawn the tea-party movement. The nation’s total federal debt next year is expected to exceed $14 trillion — about $47,000 per citizen. If Congress does nothing to reduce deficits, in 10 years the federal government will be paying more than $1 trillion per year in interest alone on the national debt. That’s more than one-fourth of the current federal budget.
The total national debt now equals 60 percent of gross domestic product. Even under optimistic assumptions, the government will add $8.5 trillion in debt in the next decade. By 2020, the total debt will equal 90 percent of the country’s economic output. Again, that’s the forecast of optimists. The higher the interest payments, the less money there is for education, national parks, defense, veterans affairs, food stamps and other programs. And as the debt rises, our country also goes deeper into hock with foreign nations. For example, China has loaned us about $920 billion.
The commission’s Democratic co-chairman, Erskine Bowles, wants the panel to endorse spending and tax collections at levels equal to 21 percent of GDP. In the past 30 years, revenue has averaged 18 percent of GDP. Federal spending now equals about 25 percent of the total economy. The goal is to reduce the government’s annual deficits to 3 percent of the total economy by 2015. That will require very unpopular, but necessary, decisions by Congress and the president.
Republicans and Democrats on the commission recognize the need to attack the problem with both spending cuts and tax increases. Bowles has indicated that spending cuts should account for about two-thirds of the total shortfall. That should be sufficient for conservative critics who think there’s no pain involved for Democrats. But tax increases must be in the mix too. The deficits are too large to be resolved through cuts alone.
The solution might not mean an increase in income taxes. The commission has been looking at so-called “tax expenditures” — about $1 trillion per year worth of credits, loopholes, and deductions (including mortgage interest and charitable deductions). Congress has the final say, but the outcome must include increasing revenue.
Lawmakers already dodged one tough choice when they decided not to make the commissions’ recommendations binding. The easy way out would be to do nothing with the panel’s report. That shouldn’t happen. Whoever is elected on Nov. 2 needs to go to Washington with a sense of purpose about putting the country back on a sound fiscal path.