The following is from the testimony of Fed Chairmen Ben Bernanke this morning:
“The increases in spending and reductions in taxes associated with the fiscal package and the financial stabilization program, along with the losses in revenues and increases in income-support payments associated with the weak economy, will widen the federal budget deficit substantially this year. The Administration recently submitted a proposed budget that projects the federal deficit to reach about $1.8 trillion this fiscal year before declining to $1.3 trillion in 2010 and roughly $900 billion in 2011. As a consequence of this elevated level of borrowing, the ratio of federal debt held by the public to nominal GDP is likely to move up from about 40 percent before the onset of the financial crisis to about 70 percent in 2011. These developments would leave the debt-to-GDP ratio at its highest level since the early 1950s, the years following the massive debt buildup during World War II. Certainly, our economy and financial markets face extraordinary near-term challenges, and strong and timely actions to respond to those challenges are necessary and appropriate. Nevertheless, even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance. Prompt attention to questions of fiscal sustainability is particularly critical because of the coming budgetary and economic challenges associated with the retirement of the baby-boom generation and continued increases in medical costs. The recent projections from the Social Security and Medicare trustees show that, in the absence of programmatic changes, Social Security and Medicare outlays will together increase from about 8-1/2 percent of GDP today to 10 percent by 2020 and 12-1/2 percent by 2030. With the ratio of debt to GDP already elevated, we will not be able to continue borrowing indefinitely to meet these demands.”
Sounds like common sense to me and yet our Congress seeks to continue to spend. Even when cost cutting measures are identified however pie in the sky they may be, the savings are not to be used to deal with the problems stated above but to “fund” yet even more entitlement programs. Yes, there are many problems to deal with, yes, there is a need to somehow expand health care coverage in America, but you can only afford what you can afford. While the possibility remains remote, I hope, imagine the fact that China even has to ask about the financial credibility of the United States, imagine that there is even the hint that sometime in the next few years that the credit rating of the U.S. could be lowered. It is absolutely incredible. Politicians are good at rationalizing every penny spent, it creates jobs in my district, it’s needed for the children, and there are long term benefits. No doubt there is truth in all of that, but the fact remains we cannot afford all that is desirable any more than the people who helped get us into this mess could afford the houses they bought or the credit card debt they accumulated. Will we ever be smart enough to say, enough? We will every have the guts to vote for someone who does not want to ply us with more earmarks? Sadly, probably not.