Another round of political theatre is coming, and it will undoubtedly distract from the worrying financial future of our nation.
If you thought the government “shutdown” wasn’t enough, just wait until the next round of financial debates. In the next few weeks, the debt limit will be the new catchphrase digested by the media ad nauseam.
What exactly is the debt limit? In a nutshell, the debt limit is a legislative requirement that the United States government must borrow no more than the amount set forth in the limit. The idea is that, as our national debt gets closer to the limit, future Congresses will be forced to negotiate over spending cuts and tax increases to ensure fiscal solvency.
The problem is, the debt limit has hardly been successful in recent years. Raised 53 times in the past 35 years, the debt limit is 20 times larger today. Instead of forcing tough decisions as it was intended to do, the debt limit has become more of a political nuisance. Politicians endlessly bicker over an illusory “grand bargain” before caving in at the last minute and simply raising the limit for another year.
The result is constant political uncertainty and an exacerbation of a debt problem that seems almost unstoppable. The national debt has continued to climb, and the Congressional Budget Office predicts that debt will reach 100 percent of GDP in 25 years. Additionally, the $17 trillion in existing debt understates the problem. As Guy Benson of Town Hall reports, “With unpaid-for, long-term obligations known as ‘unfunded liabilities’ factored in, the real number is closer to $90 trillion.” The combination of rising debt and unfunded liabilities will seriously harm economic growth, job creation, and government’s ability to provide services.
Many credit a large part of this increase to America’s explosion in entitlement transfers, including Nicholas Eberstadt, a scholar at the American Enterprise Institute, a conservative think-tank. Eberstadt’s book, A Nation of Takers, confronts our nation’s distressingly unsustainable path by using graphs and simple data.
However, some deny the importance of the coming problem. “The deficit should no longer be the country’s most pressing economic concern,” said Michael Linden of the Center for American Progress, a liberal think-tank.
Additionally, President Barack Obama has refused to negotiate on the debt limit, insisting it be raised without any reforms. ”I don’t know how I can be more clear about this: Nobody gets to threaten the full faith and credit of the United States just to extract political concessions,” he told reporters in the White House briefing room two weeks ago.
Senate Majority Leader Harry Reid, D-Nev., seemed to agree. “There’s no need for conversations,” he said, according to Yahoo News.
But to avoid saddling young people with unsustainable programs and trillions of dollars in future debt, Congress needs to engage in discussions for long-term reforms. “Everything must be on the table. And Washington must lead,” was the main conclusion of the Simpson/Bowles fiscal commission report in 2010.
The first step is to acknowledge the significant long-term financial problem, and the second is to be open to negotiation. President Obama and the Democrats have not taken those steps; instead, they are walking in the complete wrong direction.