- The Washington Times - Monday, March 12, 2007

The last time a Democrat-controlled House Budget Committee crafted a budget resolution, Bill Clinton was in the second year of his presidency; the national debt was less than $4.5 trillion; the long-term demographics (fertility and labor-force trends) were not much different from today’s projections; and the Federal Reserve chairman, then Alan Greenspan, was warning Congress about the seemingly distant fiscal challenges facing America. It’s been 13 years since Democrats controlled the congressional budget process. Today, George W. Bush is in the seventh year of his presidency; the national debt is nearly $9 trillion, having virtually doubled; the demographics have evolved as expected; and the Federal Reserve chairman, now Ben Bernanke, is warning Congress about the fiscal catastrophe that is now 13 years closer.

Here is what Mr. Bernanke recently told the House Budget Committee:

• After the nearly $200 billion Social Security surplus is removed from the budget arithmetic for fiscal 2006, the “unified” $248 billion deficit, which caused jubilation in the White House, morphed into a $434 billion deficit.

• It is a sign of the times that this is what passes for success in the fifth year of an expansion. As bad as that standard is, Mr. Bernanke offered a really disturbing perspective. “Unfortunately,” he told the committee, “we are experiencing what seems likely to be the calm before the storm.”

• Today, people 65 and older comprise 12 percent of the U.S. population. In 2030, they will account for nearly 20 percent. Today, there are five people between the ages 20 and 64 for each person 65 and older. In 2030, there will be only about three people between 20 and 64 for each person 65 and older.

• In fiscal 2006, Social Security, Medicare and Medicaid accounted for about 40 percent of the federal budget and 8.5 percent of GDP. By 2017, a decade from now, those three programs will likely command 10.8 percent of GDP. They will “rise sharply relative to GDP” after that.

• By 2030 the unified budget deficit would approach 9 percent of GDP (more than four times its present level); the ratio of publicly held federal debt to GDP would soar from today’s 37 percent to 100 percent (and then “grow exponentially after that”); and net interest outlays would nearly triple to 4.5 percent of GDP, which is proportionately greater than today’s defense budget (4 percent of GDP). These outcomes would occur under four plausible assumptions: (1) retirement and health spending follows the intermediate projections of the Congressional Budget Office, (2) defense spending declines as a share of GDP, (3) other non-interest outlays rise at the rate of GDP and (4) federal revenues remain at their historic (and current) share of GDP.

• In fact, “if government debt and deficits were actually to grow at the pace envisioned by the CBO’s scenario, the effects on the U.S. economy would be severe.”

• Neither plausibly faster economic growth nor a surge in immigration would solve America’s fiscal challenge.

So, let’s get to work. Bipartisanship, anybody?



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