The High Cost of Refusing to Confront the Exploding National Debt


The High Cost of Refusing to Confront the Exploding National Debt

Dec 6, 2018 3 min read

Former Director, Grover M. Hermann Center

Romina was a leading fiscal and economic expert at The Heritage Foundation and focused on government spending and the national debt.
The spending crisis that fuels the growing deficit and debt is a glaring example of politicians’ myopia. MarioGuti/Getty Images

Asawin Suebsaeng and Lachlan Markay have a piece in the Daily Beast citing an anonymous source that claims President Donald Trump is unconcerned with the national debt.

From their piece:

Trump noted that the data suggested the debt would reach a critical mass only after his possible second term in office.

‘Yeah, but I won’t be here,’ the president bluntly said, according to a source who was in the room when Trump is said to have made that comment during discussions on the debt.

The president’s alleged statement reflects a common stance among too many policymakers in Washington. The president may have merely voiced what many members of Congress think and how they themselves act. It’s all about incentives.

Legislators concerned primarily with getting re-elected, and meeting immediate desires of constituents, tend to be shortsighted when it comes to addressing big challenges for which they are unlikely to reap much credit.

Reforming programs that drive the debt today would unleash greater prosperity and economic growth in the future.

Today’s legislators would face the political costs, while future legislators might get the credit for a stronger economy during their terms in office.

The spending crisis that fuels the growing deficit and debt is a glaring example of politicians’ myopia.

In some sense, the national debt and its drivers represent the most predictable crisis in U.S. history. The Congressional Budget Office has been ringing the alarm bells loudly and clearly for several years.

U.S. public debt is projected to exceed 100 percent of gross domestic product in the next 10 years and continue growing on a rapid, upward trajectory from there.

The consequences are far-reaching, from higher interest rates to lower economic growth, and the potential for a severe fiscal crisis and a reduced ability to meet national security demands to keep America and its allies safe.

And yet, instead of engaging in crisis prevention efforts, legislators are still looking the other way and further worsening the dooming fiscal outlook by voting for big spending packages that fuel already heightened deficit spending.

The 2018 “cromnibus” package, which busted the budget caps by $300 billion over just two years, is merely the latest example.

The sad part is that this overspending is wholly unnecessary for the federal government to carry out its constitutional responsibilities.

The coming crisis is one of Congress’ own making. Starting decades ago and repeatedly since, Congresses have promised far more in benefits than they ever made provision for the American people to pay for.

All gain and no pain simply can’t go on forever. What sounds too good to be true probably is.

Few Americans understand the need to adjust programs, such as Medicare and Social Security, which required individuals to pay specific taxes during their working years to qualify for benefits in their old age or when they experienced a disability that prevented them from supporting themselves.

A perception that those benefits have been paid for undermines necessary reforms.

Even new and previously unpopular programs such as Obamacare quickly grow in popularity, making it difficult to roll them back. Republicans tried to repeal the health care law and failed repeatedly.

The challenge for Americans lies in that the longer legislators wait to address the drivers of the growing national debt, the more painful the remaining solutions will be.

America can avoid fiscal collapse by adjusting the policies that are driving the country deeper into debt—but legislators need to act now.

We must focus on putting better incentives in place, by holding lawmakers accountable for irresponsible fiscal decisions and demanding spending restraints with firm budgets, spending limits, and a constitutional amendment to maintain budget balance over a business cycle, like Switzerland’s highly successful debt brake.

As the U.S. fiscal situation becomes increasingly unsustainable, change is inevitable. Lawmakers should approach these changes with deliberation by reforming current policies gradually to enable the American people to adjust to any changes without doing unnecessary harm.

That means starting the process now.

Congress and the president must work together to reform health care programs and Social Security to reflect longer life expectancies with higher eligibility ages; to address lower birthrates by reducing the cost of benefits for younger generations; and to combat higher health care costs by introducing more choice, transparency, and market forces in the health care sector.

Legislators should also make it easier for Americans to save for their own needs.

One way or the other, the American people will be asked to pay the costs of the impending fiscal collapse—be it through higher taxes, greater inflation, or a smaller economy that may put the American dream out of reach for the next generation.

Americans will fare best if we come to terms with the fiscal reality the nation confronts and begin the important reform process immediately.

This piece originally appeared in The Daily Signal