In this morning’s NYT, David Leonhardt offers probably one of the most concise and balanced accounts of the United States’ deficit. The numbers are nothing short of staggering:
The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.
Although Obama, Orszag and company have maintained an outward confidence over their ability to manage the deficit, the indicators for inflation and devalued US currency are already appearing. Just yesterday, Treasury yields rose over concerns of the long term viability of US bonds. For months now, China has been expressing serious concern over the matter, prompting the country’s premier to make an unusually candidate assertion that he is “definitely a little worried” over China’s investment.
In other words, we cannot presume the ability to indefinitely finance public expenditures to address economic downturns. Consequently, it is essential the United State re-establish a government that absorbs as many as resources as it offers.
I am highly skeptical of the Obama team’s insistence that financing health care reform first is the best way forward. While lowering health costs in America—an enormous issue best left to its own post—is critical for our long term economic strength, I think making drastic eliminations to our government entitlements ought to be the immediate priority.
Although it will undoubtedly ruin numerous political careers, making cuts to Social Security, for example, should be paramount. As one of the lasting vestiges of FDR’s Presidency, Social Security has assumed an integral role in the American political system. Millions have relied on its public safety net and planned retirements accordingly. Nonetheless, as it presently stands, it is an unsustainable system. I don’t presume to possess an authoritative knowledge of Social Security’s inner workings, but raising the minimum age, lowering pay-outs and eliminating bureaucracy seem to be, in my view, intuitive and necessary steps to reducing the program’s size.
Apologists for the deficit often point to the post-World War II era as the precedent for responsibly amassing red ink, arguing that it laid the groundwork for years of post-war economic boom. However, it’s important to recall our country enjoyed unprecedented good fortune during that period. With Europe and much of Asia decimated, our country became the world’s sole provider for manufactured goods and financial institutions. After the Marshall Plan allowed Western Europe to re-capitalize its economy, we essentially guaranteed an entire continent would exclusively buy our steel, cars and technology.
We do not enjoy such fortune today. Asia, led by China and India, has become the new hub for manufacturing and efficient production. Despite our invaluable economic services, particularly in finance, the United States is no longer an indispensible epicenter of manufacturing.
Moreover, as Jim Manzi notes in this spine-chilling post, we inhabit a dangerous world in which 9 people with rudimentary bomb making materials, or worse, can destroy Billions in value. The effects of Global warming have also yet to be realized. Natural disasters are rarely anticipated, but inexorably costly. Taken together, The United States could endure a variety of catastrophic events in the coming years. Without any resources to mitigate their effects, we risk a genuine national calamity.
Cutting government programs is never painless, either politically or economically. In addition, I would argue that assuming some deficits in times of serious economic contraction is a necessary evil to encourage dynamic future economic activity. However, if we maintain our present course without addressing this deficit’s rising specter, we run the risk of suffering far greater national crises.