As difficult as it is, we must face a harsh reality: America’s out-of-control debt is becoming a grave threat to our nation’s future prosperity. The United States has borrowed itself into a massive debt totaling $12 trillion—and growing.
If we fail to stop this approaching tsunami of red ink, then the futures of our children and grandchildren will be swamped and irrevocably damaged by our negligence. The American Dream as we know it, where each succeeding generation can achieve a higher standard of success and quality of life, will be over.
That is why I am co-sponsoring a measure that would create a bipartisan budget commission to help drain the nation’s mounting sea of debt. This bill, the Bipartisan Task Force for Responsible Fiscal Action Act of 2009, would fast-track bold, debt-cutting solutions that are so sorely needed.
At a recent hearing before the Senate Homeland Security and Governmental Affairs Committee, on which I am Ranking Member, we heard from the authors of this bill, Republican Senator Judd Gregg of New Hampshire and Democratic Senator Kent Conrad of North Dakota. We also heard from witnesses Alan Greenspan, the former Federal Reserve Chairman, and David Walker, the former Comptroller General and now President and CEO of the Peter G. Peterson Foundation, whose mission is to increase public awareness of key economic challenges threatening America’s future.
America’s debt problem is monumental. We have nearly $60 trillion in liabilities and unfunded promises for programs like Social Security and Medicare. As of September 30, 2008, the United States Government’s liabilities and unfunded promises stood at a whopping $56.4 trillion. If you average this out, across America, it amounts to $184,000 per person living in the U.S., or $483,000 per American household. In 2007, the median income per household was $50,233. As Mr. Walker told us, “It doesn’t take an economist or mathematician to realize that this is unsustainable.”
We need this commission to develop a plan and build a consensus that will force Congress to act to bring our fiscal house into order. It won’t be easy: There is a growing appetite for more and more government services, while there is a lack of capacity in our economy to produce the tax revenues to pay for those programs.
Historically, Americans have paid about 18 percent of Gross Domestic Product (GDP) in federal taxes. But with the explosion in entitlement spending that is tied to the retirement of the baby boom generation, plus interest on the debt, Americans would have to pay taxes equal to 34 percent of GDP to keep pace with spending 25 years from now.
Under this crushing debt, America’s future will be increasingly mortgaged. We cannot let that happen.
The proposed debt commission, an 18-member bipartisan task force of members of Congress and Administration officials, would design a specific plan to correct the government's long-term fiscal imbalances. All options would be on the table. The Commission’s legislative recommendations would require expedited consideration by key Congressional committees, a super-majority vote in both chambers of Congress, and Presidential approval.
At our hearing, all four witnesses painted a stark portrait of America’s potential future, should we fail to act by approving this bill.
Senator Conrad warned that the debt explosion in our country has already begun. Under one 10-year scenario, gross federal debt could rise to more than 114 percent of GDP by 2019. And the long-term debt outlook is even worse. Over the next 50 years, with rising health care costs, the retirement of the baby boom generation, and the permanent extension of all of the 2001 and 2003 tax cuts, federal debt could climb to more than 400 percent of GDP. That, he noted, is a completely unsustainable course.
Senator Gregg said that next to terrorism and weapons of mass destruction, the single biggest threat that we face as a nation is the fact that we're on a course toward fiscal insolvency. “You can't get around it,” he said. “If we continue on the present course, this nation goes bankrupt, which will cause cataclysmic damage to our economy.”
Mr. Walker said flatly: “We are out of control, and we are reaching a precipice; that if we do not take definitive action soon, we could pass a tipping point.”
We cannot grow out way out, as so many have postulated. At the hearing, Mr. Greenspan warned that it is inconceivable to grow our economy out of this problem. Historically, he said, industrialized countries have experienced, at best, about a three percent annual growth in their GDP. That is nowhere near enough to overcome our mounting debt.
We must confront this conflict between what we want and what we can afford. It is time to reassess our national priorities, to make the hard decisions, and to set a new course. The budget reform proposals presented by our Senate colleagues would begin to move us forward as a nation in facing our serious fiscal challenges.
That is why I will be a strong advocate for this bipartisan debt commission.
It is time for the federal government to know what every American family instinctively knows: You have to balance your checkbook. You have to live within your means. You cannot overspend. You must make the tough choices.
This commission would help ensure that those tough choices get made.