In his final State of the Union address earlier this year, President Obama stated that he wanted “to focus on the next five years, the next 10 years and beyond.” But throughout his remarks, he failed to discuss one of the most important issues our country faces in the coming years: our $19 trillion national debt.
Despite all the financial obligations that will eventually come due in the “beyond” years, the president never addressed the topics of fiscal sustainability and debt reduction. This omission was glaring, given how our national debt has risen sharply over the past seven years, from $10.6 trillion when Obama took office to over $19 trillion today.
This accumulation of staggering levels of debt is nothing short of reckless, and the current trajectory for federal spending obligations, deficits and debt will only get worse over time. According to a recently released report by the nonpartisan Congressional Budget Office, in 10 years spending on mandatory spending programs and interest on the debt will consume nearly 99 percent of all federal revenue. This will crowd out funding for other important priorities like national defense and medical research.
Clearly this path is unsustainable.
During a recent Joint Economic Committee hearing, I asked Jason Furman, chairman of the president’s Council of Economic Advisers, if the Obama administration has a strategy to head off this looming crisis. He pointed to the progress made on reducing the ratio of deficit to gross domestic product (GDP) in the short term but offered no specific solution to reverse the sharp upward trajectory of our debt in the coming years. He admitted that debt will continue to rise as a share of GDP if our country maintains its current fiscal path.
Whether it is this administration or the next, this Congress or the next, eventually our nation’s financial day of reckoning will come. High levels of debt will increase the likelihood of a fiscal crisis in the United States, as lawmakers will have less flexibility to respond to unexpected challenges. The economy will suffer due to reduced private capital and lower productivity, while families will feel very real consequences through lower wages and higher interest rates.
The good news is solutions do exist to address this situation before it is too late. These include:
A balanced-budget amendment: Passing a balanced-budget amendment to the U.S. Constitution is a good first step to get our country’s fiscal house in order. American families have to live within their means, and a majority of states operate under a balanced-budget requirement in their state constitutions — it is time the federal government does the same.
Responsible spending cuts: Washington does not have a revenue problem, it has a spending problem. Current tax revenue is above historic levels, but the federal government’s spending still far outpaces its income.
Preserving programs heading for disaster: The main drivers of our national debt are spending on Medicare, Medicaid and Social Security. These programs provide much-needed benefits for millions of Americans, and they need to be preserved both for current retirees and future generations. This is not a problem we can continue to ignore. Taking no action will have disastrous consequences for beneficiaries of all these programs.
A civilian BRAC for mandatory spending: Base Realignment and Closure (BRAC) is a process by which an independent commission makes recommendations to improve Department of Defense efficiency, and Congress then considers these recommendations as a whole. The BRAC process has worked well for the military and should be applied across the entire federal government. An independent panel of private sector experts should go through all mandatory spending programs to identify ways to cut costs and make federal programs more efficient. Then these recommendations should be put before Congress for an up-or-down vote with no procedural gimmicks or amendments.
If policymakers do not address our fiscal problems, our nation’s ability to pay for essential government functions will be severely constrained, our economy will suffer and our national security will be at risk. The time is now to take steps toward financial stability.
Coats is the senior senator from Indiana and chairman of the Joint Economic Committee.