Forget kids — today’s debt hurts adults
Overspending is depressing economy
Fiscal conservatives unwittingly sabotage themselves by invoking “the children” when explaining the dangers of America’s ballooning national debt. They should spend lots more time discussing how federal red ink harms adults today.
Tying debt reduction to parenting causes two problems: First, if America’s children will pay off the national debt, why sweat it now? Washington’s spendaholics will embrace any available excuse to keep federal spending grinding onward. If the debt will vex the kids, it clearly needs no attention for another decade, maybe two. So until then, let’s party.
Second, millions of American adults lack children. Some have not had them. Others don’t want them. While speeches about “the children” may play moms and dads like fiddles, they barely pluck the heartstrings of the childless.
Free marketeers, thus, should add a badly needed note of urgency to their overtures on the national debt. Current and previous federal borrowing hurts American adults — and this entire economy — right now, well before little Johnny and Sally turn 21, find jobs and start signing the tab for Washington’s endless fiscal happy hour. For now, the good times are rolling.
After the Bush administration’s fiscal bacchanal, the gross national debt was $10.6 trillion when President Obama took office. Today, that figure is $15.4 trillion — and climbing. It likely will crash through today’s $16.4 trillion debt ceiling in mid-october, weeks before the November elections. According to the Congressional Budget Office (CBO), the debt will total $21.7 trillion in 2022.
Servicing this debt will be a massive national enterprise. Net interest payments will soar from $224 billion to $624 billion in 2022 alone. Over the next 10 years, the CBO projects, interest to bondholders will cost $4.25 trillion. This is nearly double the expected budget for Obamacare.
“This debt cloud over our economy is depressing growth right now,” said Sen. Jeff Sessions of Alabama, the Senate Budget Committee’s top Republican. Mr. Sessions cites economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard. They determined that advanced nations with debt-to- GDP (gross domestic product) ratios above 90 percent experience 1 percent to 2 percent lower median growth rates. Slower growth means fewer jobs, lower incomes and grimmer people. America’s debt-toGDP ratio equals 105 percent today, well within that danger zone. Mr. Obama’s budget keeps that figure above 102 percent through 2022.
“The nation’s debt is leading to higher costs for businesses and American households to obtain long-term credit,” Mr. Sessions’ budget analysts reported in May. “Longer-term interest rates would be even lower today, and more stimulating of economic activity, if today’s deficit and government debt were lower.”
Federal Reserve Chairman Ben S. Bernanke also sees the national debt menacing today’s adults. “Expectations of large and increasing deficits in the future could inhibit current household and business spending,” he said in October 2010, “for example, by reducing confidence in the longer-term prospects for the economy or by increasing uncertainty about future tax burdens and government spending — and thus restrain the recovery.”
Washington will not get serious about any of this until Democrats grow up.
Mr. Obama’s deficit projections exceed $575 billion every year through 2022. Even after proposing a $1.9 trillion tax hike, he never comes close to balancing the budget.
When House Budget Committee Chairman Paul Ryan, Wisconsin Republican, asked Treasury Secretary Timothy F. Geithner how he would cure this debt headache, Mr. Geithner sniffed: “We’re not coming before you to say we have a definitive solution to our long-term problem. What we do know is we don’t like yours.”
House Republicans last year passed Mr. Ryan’s sober, debt-curbing budget. The Democratic Senate then sandbagged it. As for 2012, “We don’t need to bring a budget to the floor this year,” declared Senate Majority Leader Harry Reid, Nevada Democrat. Why start now? In serial violation of the Congressional Budget Act, the Democratic Senate last passed a budget on April 29, 2009.
Debt-weary Americans who worry about “the children” should start fretting about Washington’s infantile Democrats.
President Obama may be getting great pleasure from the Republicans’ lengthening battle over who can beat him in November. But he faces a much stronger opponent between now and then: a weakened U.S. economy.
The news media plays up the least little sign that the Obama economy may be improving slowly, but after three insufferable years of high unemployment and a still-subpar yearover-year economic growth rate, he has yet to convince a majority of Americans that he has restored the economy to health and prosperity.
The 3 percent fourth-quarter growth rate in the nation’s gross domestic product was welcome news, but the fact is that the Obama economy grew at a sluggish 1.7 percent for all of 2011.
It isn’t expected to do a great deal better this year, either, according to the National Association for Business Economics. The association is predicting just modest growth of 2.4 percent for the rest of this year.
Americans may not follow the economic growth rate that closely, but they do follow the unemployment rate, which has always been a lagging economic indicator. That, in the end, may be Mr. Obama’s political undoing in the fall.
The government’s unemployment rate, which has to be taken with a large grain of salt, is 8.3 percent. But daily surveys conducted by the Gallup Poll put the jobless rate at 9 percent, and worse, the “underemployment rate” that includes people who can’t find full-time work or have dropped out of the work force at 19 percent.
Independent economists also think the government’s statistics undercount the real unemployment rate. “But for an alarming increase in primeworking-age adults choosing not to look for work, unemployment would be 13 percent,” says University of Maryland business economist Peter Morici.
In another gloomy economic forecast, Federal Reserve Chairman Ben S. Bernanke told lawmakers Wednesday that the nation still faced major economic and fiscal challenges before it was going to fully regain its health.
“The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part time for economic reasons is very high,” Mr. Bernanke told the House Financial Services Committee.
He reiterated that the unemployment rate isn’t likely to drop much more than it has so far and that any further decline will “edge down only slowly in coming years.”
If Mr. Obama is hoping the unemployment rate will fall gradually over the year and lift his chances for a second term, Fed forecasters threw cold water on that notion.
They are predicting that the unemployment rate will still be between 8.2 percent and 8.5 percent at the end of this year.
The National Association for Business Economics, in a report Monday, said it, too, expected unemployment to remain stuck at 8.3 percent for the rest of 2012. And it does not see the economy growing by more than a lackluster 2.4 percent for the year. Not a pretty picture for Mr. Obama or for millions of beleaguered, jobless Americans.
The White House knows full well that no president since the Great Depression has won a second term when the national jobless rate has been above 8 percent.
This will come as a shock to former Pennsylvania Sen. Rick Santorum, who lately has been emphasizing social, cultural and religious issues in his campaign for the GOP nomination, but a recent Gallup poll shows those are not big concerns of the American people right now.
“More than 9 in 10 U.S. registered voters say the economy is extremely (45 percent) or very important (47 percent) to their vote in this year’s presidential election,” Gallup reported Wednesday.
“Unemployment, the federal budget deficit and the 2010 health care law also rank near the top of the list of nine issues tested” in a Feb. 16-19 USA Today/gallup poll.
“Voters rate social issues such as abortion and gay marriage” — among the issues that Mr. Santorum has made the centerpiece of his campaign — “as the least important,” Gallup said.
Terrorism and national security, taxes, and the gap between rich and poor also rank higher than social issues, which fell to the bottom of Gallup’s survey with 15 percent rating them “extremely important” and 23 percent “very important.”
Mr. Santorum has been emphasizing these issues in his campaign remarks in the past few weeks in an appeal to the large evangelical vote that plays a heavy role in GOP elections. But Gallup’s poll numbers show that economic issues not only rank at the top of voter concerns but also rank high among all party groups, “with roughly 9 in 10 Democrats, independents and Republicans rating it as extremely or very important to their vote.”
That spells bad news for Mr. Obama if the economy does not significantly improve in the months ahead. There are, to be sure, indications of some economic gains here and there: the decline in jobless benefits in recent weeks, a rally in the stock market and an uptick in monthly job-creation numbers.
But thus far, none of that has resulted in any significant movement in Mr. Obama’s job scores. Gallup’s national daily surveys put his job-approval rating at a dismal 46 percent Thursday, with 49 percent disapproving.
In its “trial heat” head-tohead matchup polls among the two front-runners for the GOP nomination, Mitt Romney led Mr. Obama by 50 percent to 46 percent. The president barely edged Mr. Santorum by a razor-thin 49 percent to 48 percent.
These numbers show that Mr. Obama has a long way to go if he is to convince a majority of Americans they are a better off today than they were before his presidency.
With Mr. Obama’s bloated budget turning in its fourth trillion-dollar-plus deficit, gas prices soaring to $4 a gallon and high unemployment as far as the eye can see, that’s a very hard sale to make.