An Unsustainable Path

I’ve mentioned several times that I’ve been a registered Republican since I was 21. One of the Reb articles of faith back in those old days was reducing the national debt and balancing the federal budget. The Dims were labeled the “tax and spend” party, for good reason. Then, out of the blue, came a president named Reagan and one named Bush and the national debt soared to unprecedented levels and balancing the budget became something that was always going to happen four to six years in the future.

The ultimate economic curveball came during the Clinton presidency when the long run of annual budget deficits magically morphed into a large budget surplus, thereby confirming that the political world had turned upside down. When Bush 2 entered the West Wing he resumed the course set by Reagan and Bush 1, which brings us to the bleak outlook we face today.

Following are two summaries from reports recently issued by the General Accounting Office. If anyone is interested the full reports can be obtained via the highlighted links. They speak for themselves and their message is not good. Anyone with young children or grandchildren – i.e., many, many of us – should pay close heed to the less than subtle warnings in these reports. Unfortunately, there are numerous other GAO and Congressional Budget Office reports that sound similar alarms for those who are willing to hear them.

The question is: does anyone in the White House or the Capitol Building in Washington hear them? We’ve become fiscally irresponsible as a nation and the ticking clock in the croc’s belly can be heard even above the din of the political rhetoric that flows from both sides of the isle. Read it and weep.
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The Nation's Long-Term Fiscal Outlook: January 2007 Update GAO-07-510R February 23, 2007

Since 1992, GAO has published long-term fiscal simulations of what might happen to federal deficits and debt levels under varying policy assumptions. GAO developed its long-term model in response to a bipartisan request from Members of Congress who were concerned about the long-term effects of fiscal policy. In 1992 GAO said: "The federal budget is structurally unbalanced. This will do increasing damage to the economy and is unsustainable in the long term. Regardless of the approach chosen, prompt and meaningful action is essential. The longer it is delayed, the more painful it will be." These words are as relevant today as when GAO first published them.

GAO's current long-term simulations continue to show ever-larger deficits resulting in a federal debt burden that ultimately spirals out of control. Although the timing of deficits and the resulting debt build up varies depending on the assumptions used, both simulations GAO produced show that we are on an unsustainable fiscal path.

Fiscal Stewardship: A Critical Challenge Facing Our Nation GAO-07-362SP January 31, 2007

The U.S. government is the largest, most diverse, most complex, and arguably the most important entity on earth today. The United States is also a great nation. It has much to be proud of and much to be thankful for. However, our nation is not well positioned to meet the challenges and capitalize on the opportunities of the 21st Century. We are also failing to properly discharge one of our biggest stewardship responsibilities to our children, grandchildren, and generations of unborn Americans: fiscal responsibility. The purpose of this publication is to assist both the Congress and American citizens in understanding and evaluating the federal government's current financial condition and long-term fiscal outlook.

The federal government's financial condition and fiscal outlook are worse than many may understand. Despite an increase in revenues in fiscal year 2006 of about $255 billion, the federal government reported that its costs exceeded its revenues by $450 billion (i.e., net operating cost) and that its cash outlays exceeded its cash receipts by $248 billion (i.e., unified budget deficit). Further, as of September 30, 2006, the U.S. government reported that it owed (i.e., liabilities) more than it owned (i.e., assets) by almost $9 trillion. In addition, the present value of the federal government's major reported long-term "fiscal exposures" – liabilities (e.g., debt), contingencies (e.g., insurance), and social insurance and other commitments and promises (e.g., Social Security, Medicare) – rose from $20 trillion to about $50 trillion in the last 6 years.

The federal government faces large and growing structural deficits in the future due primarily to known demographic trends and rising health care costs. These structural deficits, which are virtually certain given the design of our current programs and policies, will mean escalating and ultimately unsustainable federal deficits and debt levels. Based on various measures and using reasonable assumptions, the federal government's current fiscal policy is unsustainable. Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our domestic tranquility and national security.
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Protecting our national security is all the rage right now. It’s time to deploy the troops in the Legislative and Executive Branches of the federal government to fight this enemy that openly and unabashedly stalks our children and grandchildren every day and every night. This is a potentially crippling threat of our own making and no one can solve it but us.

How? Every household in America knows the answer – increase our revenue and decrease our spending – the two things that politicians dread the most. Well, boys and girls, recess is over. The troops in uniform have set the example for the troops in suits – it’s time for an infusion of honor, courage and commitment in Washington, DC.