It's the interest that's killing us. Most conservative economists agree. Some also believe President Obama's budget proposals don't take this into account, according to a report in the Washington Post.
Starting in 2014, net interest payments will surpass the amount spent on education, transportation, energy and all other discretionary programs outside defense. In 2018, they will outstrip Medicare spending. Only the amounts spent on defense and Social Security would remain bigger under the president's plan.
The soaring bill for interest payments is one of the biggest obstacles to balancing the federal budget, pushing the White House and Congress to come up with cuts deeper than previously imagined. Unlike with discretionary spending or even entitlement programs, the line item for interest payments cannot be altered except through other budget cuts.
The phenomenon is a bit like running up the down escalator. Without interest payments, the president's plan would balance the budget by 2017. But net interest payments that year are expected to reach $627 billion, up from $207 billion in the current fiscal year.
Interest rates on treasury notes will rise, according to White House projections with 10-year notes bringing about 5% by 2015. The US experienced the same massive debt following World War II, but now the interest payments go, for the most part, overseas.
The debt projections could be eased significantly by growth. What the gloomier economists don't take into account is the growth predicted as a result of government investment, proposed by Obama, in infrastructure and technical updates.
"We're running a gigantic deficit, and we're not growing very fast," said Kenneth Rogoff, an economics professor at Harvard University and former chief economist at the International Monetary Fund. "We're on a dramatically unsustainable path."
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EJ Dionne, also in the Washington Post, scoffs. The conservatives have been successful in convincing Americans that actually raising taxes is unthinkable.
For 30 years, conservative ideologues have played moderate deficit hawks for suckers.
You'd think this might endow those middle-of-the-road deficit-busters with a touch of humility. Fat chance. They stick with their self-righteous moralism, pretending to be bipartisan and beyond ideology. In fact, they make the problem they want to solve worse by continuing to empower the tax-cuts-in-every-season conservatives.
It's thus satisfying to see President Obama ignore the willfully naive who are wailing over deficits. He knows that new revenue will have to play a big role in deficit reduction. He also knows that House Republicans are pretending we can cut our way out of this mess and would demagogue any general tax increases.
Just do it, Dionne says. He doesn't put it this way, but he's urging "moderates" to grow a pair. The debt commission was a weak effort at best.
...Bowles-Simpson proposed about twice as much in spending cuts as in revenue increases. You would think that moderates could at least hold out for a 50-50 split. But no, they'll do anything to win over a few conservatives.
As a result, any conservative who supports even the smallest tax increase is hailed as courageous. Any liberal who proposes moderate spending cuts is condemned as a gutless coward unless he or she also supports slashing Social Security and Medicare. What's "moderate" or "balanced" about this?
I hope Obama has the spine to keep calling the bluff of the deficit hawks until they get serious about changing the politics of deficit reduction. We can't afford another 30 years of fiscal evasion.
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To which this blogger would add: don't let conservatives push the origins of our huge debt under the rug anymore. Say it: successive Republican administrations created the debt. No, shout it! Quit letting the perps decide what the punishment should be.
NPR had a report this morning on the bipartisan efforts of a Democratic senator, Mark Warner, and a Republican senator, Saxby Chandliss, to create a compromise on the budget. They listed Social Security, Medicare/Medicaid, and defense spending as the chief culprits. I'd add another: Republican administrations. We aren't going to get anywhere until we rate each of these by the damage they're causing to the budget and then cut the accordingly.
So let's start with the worst first and give assign each cuts according to their how much they've contributed to the nation's debts.
Republicans should be cut by 75%. They have been our biggest economic drain for at least three decades.
Defense spending, 50%. That would include the Department of Homeland Security.
Medicare/Medicaid. 25% at most. The real problem here is a lousy health care system that's overloaded with administrative costs. Rather than cut by 25% and given the 75% cut in Republicans, we could spare Medicare/Medicaid and go straight to a single payer system.
Social Security, 0%. The alleged ill health of the Social Security system is a canard.
