Early last December, the National Commission on Fiscal Responsibility and Reform - also known as the Debt Commission - released its report on America's current reckless financial course and the disastrous future that lies ahead unless we change direction. Appropriately, the report's title is "The Moment of Truth."
A few days later, an editorial cartoon appeared in newspapers throughout the country that perfectly illustrated why this is a defining moment in our history. It showed two maternity ward nurses trying in vain to console a bawling infant. "What did you do," asked one nurse, "tell him his share of the national debt?"
Today, that baby's share tops $45,000. Add in Mom, Dad, and Big Sister, and that family is on the hook for $180,000. Nationwide, the national debt at the beginning of 2011 topped $14 trillion - that's a 14 followed by 12 zeroes. That's 14 million times a million. That's enough dollar bills to lay a path from to the sun and back - nearly seven times!
Just as alarming as the astronomical size of that number is its rapid growth. Just seven months ago, the debt stood at $13 trillion. In 2008, when the debt passed the $10 trillion mark, the National Debt Clock in New York's Times Square had to be redesigned to accommodate the additional digit. It took the U.S. government 191 years, from 1791 until 1982, to run up its first trillion in debt.
This debt, like the debt that families wrestle with around the kitchen table, is the result of spending exceeding income. In 2010, federal spending was nearly 24 percent of Gross Domestic Product (GDP), the value of all goods and services produced in the economy. That was the highest percentage since World War II. Because of the weak economy, revenues fell to 15 percent of GDP last year, demonstrating how important healthy economic growth is to controlling the deficit. The gap between spending and revenue is the budget deficit, adding up year after year into our exploding national debt, our unsustainable mortgage on our future.
Since the last time our budget was balanced in 2001, the federal debt has increased dramatically, rising from 33 percent of GDP to 62 percent in 2010. If we continue on our current course, debt will soar ever higher, reaching 90 percent of GDP in 2020. Interest payments alone on that debt will be nearly $1 trillion. By 2025, revenue will cover only interest payments, Medicare, Medicaid, and Social Security. Every other federal obligation - from national defense and homeland security to transportation and education - will have to be paid for with borrowed money.
Throughout our nation's history, Americans have passed along to their children a nation that is stronger, more secure, and that offers more opportunity. We cannot be the first generation to betray that trust.
But this crisis is not lying in wait for future generations - it is here today. Federal borrowing at this level hampers economic growth by crowding out private investment by businesses and individuals. We are making it too expensive for entrepreneurs and businesses to raise capital, innovate, and create jobs. Rising interest payments on the debt deprive the federal government of the resources needed to respond to crises and invest in priorities. And it exposes our nation to foreign creditors, such as China, that may not share our values and strategic interests.
The 18-member Debt Commission was established by President Obama last spring and given a two-part mission: to bring the budget into primary balance (that is, excluding interest costs) by 2015; and to substantially improve our nation's long-term fiscal outlook. Its bipartisan membership represented a broad range of backgrounds and experience, led by Erskine Bowles, former Chief of Staff for President Clinton, and Alan Simpson, former Republican Senator from Wyoming.
To help achieve these goals, the Commission developed a six-part plan. Here is a brief summary:
• Enact tough discretionary spending caps to force budget discipline in Congress, and make significant cuts in both security and non-security spending by cutting low-priority programs and streamlining government operations.
• Reform taxes by sharply reducing rates, broadening the base, simplifying the code, and eliminating the many tax breaks that favor some taxpayers over others. Reform corporate taxes to make America more competitive, and cap revenue to avoid excessive taxation.
• Contain health care costs through reforms to physician payments, cost-sharing, malpractice law, prescription drug costs, and government-subsidized medical education.
• Cut agriculture subsidies, and put government retirement, student loan, and private pension insurance programs on a sustainable path.
• Reform Social Security to ensure long-term solvency and reduce poverty among the elderly.
• Reform the budget process to ensure the debt remains on a stable path, spending stays under control, inflation is measured accurately, and taxpayer dollars go where they belong.
The Commission's plan is a bracing reminder of the challenge that confronts us. While I don't agree with all of its recommendations, the plan serves to start the conversation - and reminds us that the longer we wait to act, the more difficult the task. Action must be taken soon, and the President should introduce a budget within weeks that forcefully limits spending. Last year, I proposed freezing spending at 2010 levels in order to impose needed budget discipline. We also could save billions of dollars by eliminating the taxpayer subsidy for corn-based ethanol, reducing price supports for large corporate farmers, and preventing the funding of an alternative F-35 jet engine that the Pentagon opposes. The two-year extension of the 2001 and 2003 tax relief laws, which I supported, gives us the opportunity to overhaul our tax system to make it fairer, simpler, and more pro-growth. And, most important, any reforms we adopt must ensure that entitlement programs - particularly Social Security and Medicare - keep the promises we have made to our most vulnerable citizens while putting these vital programs on a fiscally sustainable path.
The work that lies ahead will be difficult. There will be those who want everything on the table except their favored program, those who want no sacred cows protected but their own. Congress must do what all American families do when they huddle at the kitchen table to deal with financial difficulties - make the tough choices. We must do the same, for today and for the generations to come. The moment of truth is here.