On June 22, the Congressional Budget Office released its annual “Long-Term Budget Outlook.” To call the document grim would be a grave understatement. It describes a massive wave of debt that threatens very soon to drown us—and that, thanks to the weak economy and the continuing growth of spending, is coming at us very fast.
In last year’s outlook, which was alarming enough, the CBO projected that our national debt would be 91 percent of GDP in 2021. The agency now says debt will be 101 percent of GDP in 2021—that is, a decade from now our debt will be larger than our economy, and still growing quickly. By 2030, CBO projects debt will top 150 percent of the economy, and by 2037 it will be 200 percent and growing. At that point, the federal government would be spending almost a tenth of the nation’s GDP on interest payments alone, up from 1 percent today.
No nation could prosper under such a massive burden of debt. The CBO is notoriously understated in drawing conclusions from the figures it provides, but last week’s report brims with barely restrained panic. Alarming as the raw figures are, the report notes, its projections “do not include the harmful effects that rising debt would have on economic growth and interest rates. If those effects were taken into account, projected debt would increase even faster.” “Rising debt,” moreover, “would increasingly restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises.”
And a crisis is exactly what we should expect. “Growing federal debt,” the report states, “also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates.” In the poker-faced bureaucratic parlance of the CBO, this kind of talk is tantamount to shouting fire.
To be sure, all of this will happen only if we fail to change course. It will be a choice made knowingly by leaders who were warned well in advance about the consequences. Congressional Republicans have offered a detailed alternative to this dire scenario: The budget they passed in April would curtail spending and reform entitlement programs to reduce the debt dramatically and enable economic growth.
But rather than propose an alternative of their own, or take the Republican budget as an invitation to negotiate, Democrats have demagogued the Republican plan—scaring seniors about a Medicare reform that would not even affect them, for instance—and have otherwise offered nothing.
The Democratic Senate has not proposed a budget in either of the last two years. In February, President Obama offered a budget that would actuallyincrease the deficit. Then in a speech in April he essentially retracted it, and offered in its place a vague and incoherent series of policy goals that left Democrats with no particular agenda. On June 23, at a hearing of the Budget Committee, CBO director Douglas Elmendorf was asked what his agency made of the proposals in that presidential address. “We don’t estimate speeches,” he said. “We need much more specificity than was provided in that speech.”
Republicans have no way to force the Democrats to be more specific and to take the crisis seriously. But they are doing their best to use the fight over raising the government’s debt ceiling—a fight the Democrats cannot avoid—to compel some responsible action.
Until last week, that fight had been focused on negotiations led by Vice President Biden. Those talks certainly revealed something about the Democrats’ priorities: In the midst of a spending-driven debt explosion and a weak economy, Democrats in Washington want to raise taxes. But the negotiations also revealed the continuing unwillingness of the president to make specific proposals about how to reduce spending, reform entitlements, and bring the debt under control. On June 23, House majority leader Eric Cantor (who had represented House Republicans at the negotiations) decided he’d had enough, and left the talks in order to force the issue to a higher level and compel the president to get specific.
Even some congressional Democrats seem frustrated by the White House’s absenteeism. Asked if the breakup of the Biden talks would mean that a bipartisan group of senators negotiating a deal of their own would take center stage in the budget debate, Senate majority leader Harry Reid said, “My honest feeling is that we are beyond gangs of five and gangs of sixes.” Instead, the president would have to get directly involved. “It’s in the hands of the speaker and the president and, sadly, probably me,” Reid said.
“Sadly” is right, but Reid and Obama are the leaders the Democrats have, and it is high time they faced up to the nation’s foremost domestic challenge. Republicans were right to force the budget debate to the top, and now President Obama must decide if he is finally ready to get serious.
The country is facing a fiscal disaster greatly exacerbated by the policies of the Obama administration and congressional Democrats, but so far the president has refused to acknowledge the problem or act to alleviate it. He has been struggling to avoid making tough choices, hoping instead to paper over our troubles with words and so distract voters from the need for action. The public, however, is more serious than the president supposes. If he fails to show leadership and take meaningful action to reduce our debt, he will find that voters do not estimate by speeches. They reach their judgments by looking at results.