Time to Solve the Deficit Problem

When I began my trade as a reporter, the "Greatest Generation" was in charge.  Having endured the Great Depression, saved the world from Hitler, Mussolini and the Japanese, only to face a new threat from the Soviet Union, there was pretty much a consensus about several things: to maintain peace, a strong military was needed and the debt incurred during World War II must be paid off.  A large national debt was viewed as a threat to the nation's security.

Vietnam brought changes.  Lyndon Johnson wanted to be remembered by history as a great president.  Business was booming, jobs were plentiful and inflation was heating up.  His advisors urged him to raise taxes, but he didn't think he could get the votes.  Besides, he wanted to create a Great Society, eliminate poverty.  But the biggest item in his budget wasn't the war on poverty, but the Vietnam War.  If this sounds a bit like today, it was.  And the result was inflation.  Dealing with inflation was left to President Richard Nixon, who didn't want to raise taxes either.  He left that to the Federal Reserve.  If that sounds pretty much like today, it is.

The difference between then and now is that the Greatest Generation tended to view excessive debt as a bad thing, so it never got seriously out of control.  But a new report from the Committee on Economic Development warns that unless action is taken promptly, rising debt service costs will consumer the federal discretionary budget, crowding out all other priorities and quickly move the nation to an economic crisis.  

Federal government debt has risen to 98% of GDP, a level not seen since World War II, and may expand to 195% or more by 2053, CED warns.  It calls for "an urgent and determined change of course" to reduce the national debt to 70% from the current 98%. This will take two to three decades to accomplish in a responsible manner, CED says in a new study.  The study is worth reading.

"With a vibrant economy and a functioning federal government, the problem is solvable," writes Alan Murray, ceo, Fortune Magazine.  "While the U.S. has a vibrant economy, it still lacks a functioning government. Deficit reduction involves shared sacrifice, and that has to be done on a bipartisan basis," Murray says, adding: "Don’t hold your breath."  The CED Solutions Brief is well worth reading, if for no other reason than when your Congressman or Senators tells you nothing can be done, you'll know that's not true.