The deficit: Can the U.S. ever dig itself out?
President Obama’s 2011 budget would leave us with a deficit of $1.3 trillion—and projects massive deficits for a decade.
Could the United States of America become a deadbeat nation? asked Investors Business Daily in an editorial. To question whether the most powerful country on earth could wind up defaulting on its debt “would have seemed absurd just a few years ago.” But that was before Washington’s “extraordinary surge of debt-related spending” left some economists fretting about America’s very solvency. President Obama’s 2011 budget would leave us with a deficit of $1.3 trillion—and projects massive deficits for a decade. Congress is lifting the debt ceiling—the amount of cumulative debt the Treasury can carry—to $14.3 trillion, “roughly the size of the entire economy.” At this rate, by 2020 we’ll be spending more on interest on that debt than on anything besides entitlements. Obama keeps saying he inherited this mess, said National Review. Fair enough. But he’s taking that “swelling juggernaut and supersizing it.”
Bigger deficits are an inevitability during a downturn, said R. Glenn Hubbard in The Wall Street Journal, because tax receipts plummet. But with Medicare and Social Security costs about to explode to support retiring baby boomers, the nation’s economic health is now truly in jeopardy. Every dollar the government spends servicing the debt is not spent productively—on roads, or bridges, or education. Even if policymakers wanted to tax their way out of this hole, the tax hikes needed to dent the deficit monster would have to be so large that they’d stifle economic growth. So let’s face it: “The problem is spending.”
Don’t buy into this deficit hysteria, said Paul Krugman in The New York Times. “Many economists take a much calmer view of budget deficits” than the fearmongers on the Right, who have a simple, politically motivated goal: to stifle Obama’s ambitious agenda, from health-care reform to jobs-creating stimulus spending. “The hypocrisy is breathtaking”—these same “apostles of fiscal rectitude” voted for George W. Bush’s “budget-busting tax cuts,” Medicare expansion, and trillion-dollar foreign wars. The truth is that “running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do,” because without more federal dollars coursing through a depressed economy, we might never recover. But in the long term, said The New York Times in an editorial, the U.S. can’t keep the red ink flowing at this rate. Creditors such as China could lose confidence in our government’s ability to pay back the debt and “decide to put their money elsewhere.”
It’s time for both Republicans and Democrats to level with the American people, said Robert Samuelson in The Washington Post. Nearly half of all spending involves just three programs: Social Security, Medicare, and Medicaid. Either we raise everyone’s taxes 50 percent to cover the shortfall, or we raise the retirement age to 70 and reduce benefits for wealthier retirees. Farm subsidies, high-tech weaponry, and other unnecessary programs aimed at “favored constituencies” will have to be completely eliminated. “We can no longer just tinker.” But can Americans handle the truth? asked Jacob Weisberg in Slate.com. Polls show that people want it “both ways”: We want balanced budgets and lower taxes; we dislike “big government,” unless it’s providing a service we want. Because of our immaturity, the U.S. faces an era of historic decline. “To change this story line, we need to stop blaming the rascals we elect to office, and look instead to ourselves.”