Big government debt mortgages our children's future
By: Jeb Hensarling and Paul Ryan - Part one of a three-part series
Over the course of the past year Americans have been increasingly alarmed by how dangerously mired in debt our nation has become. The U.S. debt rose past $13 trillion this month, about 89% of Gross Domestic Product (GDP) , and the International Monetary Fund now projects that the U.S. government’s debt will surpass GDP in 2012, a mere 18 months from now – with no plan in place to set our nation’s finances on sustainable course.
As members of the National Commission on Fiscal Responsibility and Reform, we recently heard testimony that when a nation’s gross debt reaches 90% of GDP the needle is in the red zone and economic growth will begin to slow about 1% per year.
One percent is about a third of our projected growth – in practical terms this means millions of jobs will not be created and American families will forego billions of dollars in income leading to a lower standard of living. In addition to the real pain inflicted on families, this creates a vicious cycle of lower government revenues and more borrowing at ever-increasing cost which will result in what some have termed a “debt super-cycle.”
This is exactly what has been happening in Greece and other European countries where instead of economizing in the face of deficits politicians have chosen to maintain spending on government payrolls and services, which has led to a cycle of rationalizing, hiding and obfuscating the true cost and growth of government and a scramble to borrow at ever-higher interest rates.
Here at home, there has been a concerted effort by the Obama Administration and Democrats in Congress to paint our current spending policies as a temporary aberration created by the economic crisis of 2008.
Nothing could be further from the truth – this level of spending is a policy choice made in full knowledge of its damaging effects on the economy and the American way of life.
President Obama made the choice to submit a budget which proposes increasing federal spending to more than 50 percent over the 2010 level at the end of the decade. To accomplish this, the President proposes growing federal spending from its 2010 estimated level of $3.618 trillion – or $30,875 per household – to $5.670 trillion in 2020, which is $48,387 per household.
Despite $2 trillion in tax increases, spending in the Obama budget will still average nearly $1 trillion a year for the next ten years and by decade’s end, each household’s share of publically held debt will equal $173,185. This budget will produce a tidal wave of debt that will eventually eclipse 300% of GDP by 2050 – which will crush the next generation in red ink and likely crash our economy well before then.
These unsustainable debt and deficit burdens were not imposed upon us by some outside force, they are created by the choice to grow the federal government and spend at unprecedented levels.
Today, our leaders are again making the tragic choice to mortgage our children’s future. But there is an alternative, and over the next two days we will share with you how controlling spending, reforming our social safety net programs and lifting the crushing burden of debt will spur job creation and put us back on a sustainable fiscal and economic path.