July 14, 2007

July 14, 2007 | Commentary on Federal Budget

Long Term Fiscal Burdens Continue to Pile Up

"The most serious threat to the United States," U.S. Comptroller General David Walker has warned, "is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility." Walker, the federal government's chief auditor, has been traveling across the country like a modern Paul Revere encouraging ordinary Americans to focus on the long-term fiscal threat we face.

True, Walker acknowledges, the economy is vibrant for now: Job creation is strong, inflation low, incomes up. But he warns of "a fiscal cancer" that "could have catastrophic consequences for our country" -- the imminent retirement of 78 million Baby Boomers who will place unimaginable strain on the three major entitlement programs -- Social Security, Medicare and Medicaid. If lawmakers do nothing, Uncle Sam eventually will be able to do little more than "pay interest on the mounting debt and some entitlement benefits." There will be no money -- zero, zilch -- left for anything else, including national defense and homeland security.

Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson agree. These rising costs, Paulson told lawmakers recently, "will drive government spending to unprecedented levels, consume nearly all projected federal revenues, and threaten America's future prosperity."

Most lawmakers acknowledge the gravity of the problem. Sen. Kent Conrad (D-N.D.), who chairs the Senate Budget Committee, admits that he and his colleagues "know … we are on a course that doesn't add up." But, he adds, "it's always easier to … kick the can down the road to avoid making choices. … you get in trouble in politics when you make choices."

Under this perverse logic, Conrad got into no trouble in authoring a budget blueprint for 2008 and beyond that blissfully ignores this gathering fiscal storm. Worse, Conrad's own actions in the budget debate transcended mere ignorance. He rebuffed repeated efforts by his Republican counterpart on the budget panel, Sen. Judd Gregg (R-N.H.), to force Congress to tackle entitlement programs head-on.

If it is morally reprehensible to kick the entitlement can down the road, what can we say of lawmakers who want to make the entitlement firestorm even hotter?

Last week, the House approved a feel-good higher education bill that creates nine new entitlement programs, meaning taxpayer dollars will be spent automatically, including one that transitions the popular Pell Grant program toward entitlement status.

But the fiscal madness doesn't stop there. Soon, both chambers will consider dramatically expanding the State Children's Health Insurance Program (SCHIP). Launched a decade ago as a relatively modest effort to help states provide health coverage to poor children, SCHIP has grown and grown. Many states opted to cover adults. Some even extended eligibility to families with annual incomes as high as four times the official poverty level -- $82,600 per year for a family of four. Not surprisingly, many states exceeded their federal allotment, causing Congress to approve a $676 million bailout in 2006 with pressure building for an even larger one this year (California alone is likely to overspend by $300 million this year).

Now congressional liberals like Sen. Hillary Clinton (D-N.Y.) and John Dingell (D-Mich.), buoyed by a pharmaceutical industry advertising campaign, want to expand SCHIP significantly. They envision SCHIP as the insurer of first resort for more than 70% of America's children, at an estimated annual cost of more than $4,000 per child.

In a further fit of fiscal insanity, last week the Senate Veterans' Affairs Committee approved a bill that would open the already overburdened VA health system to 17 million mostly middle-income veterans with no service-related disabilities. "If we open the door," Sen. Larry Craig (R-Idaho) predicted, "the reality is that they will come," thereby increasing waiting times and jeopardizing the quality of care for veterans who require immediate attention. Last, but not least, soon Congress will consider legislation that will dramatically expand farm subsidies, despite a thriving farm economy and soaring farmer incomes.

Let's return to David Walker for the necessary 30,000-foot perspective. The coming entitlement crisis, he argues, is ultimately "not just about numbers" but, rather, raises profound moral questions. "We are mortgaging the future of our children and grandchildren at record rates, and that is … an issue of immorality."

Indeed, when we hit the fiscal wall, our children and grandchildren will ask us where we were when these long-term fiscal burdens were piling up. They will want to know what we did to avert this predictable disaster.

What will we tell them?

Mike Franc, who has held a number of positions on Capitol Hill, is vice president of Government Relations at The Heritage Foundation.

About the Author

Michael Franc Distinguished Fellow
Government Studies

First appeared on HumanEvents.com