If you are blessed, as I am, to have grandchildren, you may not realize that they are more than just treasured children of your children, a gift beyond measure. They are also indentured servants who will be paying off your cumulative national debt for a good part of their lives on earth.
According to the Congressional Budget Office’s (CBO) annual summer budget update, our national debt “which was as low as 33 percent of GDP in 2001, would reach an estimated 54 percent of GDP this year and grow to 68 percent of GDP by 2019.”
Writing on his blog yesterday, CBO director Douglas Elmendorf, the same fellow who blew the whistle on the Obama administration’s faulty estimates of the cost of its health care plans and was rewarded with a friendly visit with the President at the White House, says “the federal budget deficit for 2009 will total $1.6 trillion, which, at 11.2 percent of gross domestic product (GDP), will be the highest since World War II [emphasis added].”
A weak economy and elevated spending is the cause of this deficit figure. “The deficit has been boosted by various federal policies implemented in response, including the stimulus legislation and aid for the financial, housing, and automotive sectors,” says Elmendorf.
And it gets worse beyond the ten-year budget projections. Director Elmendorf says that “the nation will face further significant fiscal challenges posed by rising health care costs and the aging of the population. Continued large deficits and the resulting increases in federal debt would, over time, reduce economic growth.”
“Putting the nation on a sustainable fiscal course will require some combination of lower spending and higher revenues than the amounts now projected,” he says. I find it somewhat consoling that he mentions only lower spending and higher “revenues” and not taxes per se. Unfortunately, the idea of pursuing something like a dynamic, growth-oriented supply-side approach with budget restraint and tax cuts for individuals and corporations, now the highest in the free world, is the farthest thing from the minds of either the Hill or the White House.
The CBO does not mention the distinct possibility of runaway inflation, but director Elmendorf is cognizant of the looming entitlement debt bomb as evidenced by his mention of our aging population. These are additional clouds on the horizon of our children and grandchildren. There are also massive liabilities, presently kept off-budget for Fannie and Freddie, as recently pointed out by the Wall Street Journal.
And you thought those toddlers were just cute. They are the ones who are going to pay for this generation so it can party like it’s 2009.
Peter Orszag, White House Budget Director, released his own report just before CBO released its own, no doubt seeking to get ahead of the story. Orszag confirmed that the stimulus package was likely to cost “tens of billions of dollars” more than expected, resulting in next year’s budget skying to just over $1.5 trillion, a figure only slightly less than CBO’s. Moreover, deficits are likely to remain elevated even after the economy recovers, averaging more than $800 billion a year through 2019 at which time the White House estimates the annual gap between spending and revenue will be $917 billion.
According to the Washington Post‘s Lori Montgomery, “All told, the White House predicts that the nation will have to borrow an additional $9 trillion over the next decade to finance the annual deficits, driving accumulated national debt to nearly $23 trillion in 2019 — or 76.5 percent of gross domestic product, the highest since 1950.” This is a higher percentage than even CBO calculates a decade out.
Still, director Orszag has his game face on: “I know some will say this report proves we can’t afford health reform. I think that analysis has it backwards,” says Orszag. “Given the long-term nature of the problem, we simply can’t afford to wait.”
Cannot afford to wait for what, pray tell? More taxes and debt? Here’s a thought. Deal with entitlement reform and unfunded debt and liabilities first. Then “reform” health care.
My own personal hero, Congressman Paul Ryan (R-WI), from my wife’s home state of Wisconsin, notes that “the Federal Government is borrowing half of its entire budget this year alone, and it is working Americans and their children, who will foot the bill.”
“Today’s news confirms what we’ve all know: Washington’s spending binge has made a bad situation even worse — driving deficits to unprecedented levels, and plunging our nation deeper in debt.”
Yes, our grandchildren are now our very own indentured servants, compliments of bipartisan spending over the last decade, up to and including this moment. This legacy of debt and taxes is a sad one to leave to America’s future generations to whom we all owe a much better deal than the one they are getting.