A Medicare card.Image via WikipediaGovernment reform orgs. deliver news on major events within their areas of expertise.
From: Facing Up to the Nation's Finances
[The deepening federal fiscal condition is receiving increasing alarm and entreaties from America's fiscal watchdogs. -David Weller]
By ScottBittle on October 20th, 2008
More and more economists are arguing that a global financial crisis isn't the time to worry about the federal deficit. A wide range of budget expert and economists – even the ones who'd normally be considered budget hawks -- say the government has to do whatever it takes to stabilize the financial markets, get credit flowing, and mitigate the recession that's almost certainly upon us. If that means running deficits, they argue, then that's what we'll have to do.
And make no mistake about it: the federal government will run deficits over the next few years. The Congressional Budget Office projected deficits of more than $400 billion for the next two years, even before the global financial crisis hit. Since then, we've added a $700 billion bailout plan, and the next presidential administration will very probably add some sort of additional stimulus package to that. That could add up to an unprecedented $1 trillion deficit next year.
Despite any campaign rhetoric you may have heard, it's going to be almost impossible to balance the budget under those circumstances. You can't possibly cut spending enough or raise taxes enough to bring those figures into line without doing massive damage to vital programs or to the broader economy.
So, fair enough. When you're trying to put out a fire, you don't worry about how much water you're using. No one wants the U.S. economy to wind up like Japan in the 1990s. The real challenge facing us will be making sure the solution to the current crisis doesn't set us up for the next one.
It's absolutely true, there are times when running a deficit makes sense. And if the government only ran in the red during recessions and national emergencies, we'd be laughing. But in this country, we routinely ask more of the government than we're willing to pay for. The U.S. has run a deficit for 31 of the last 35 years, and we weren't in a constant state of crisis for those decades. Deficits are the default setting, and they make it harder to deal with real emergencies when they do crop up.
Secondly, the long-term outlook for the federal budget is very, very ugly. Every expert who looks at the long-term state of the budget uses the same word to describe it: unsustainable. The national debt has reached a staggering $10 trillion, and we've got another $53 trillion in liabilities ahead of us to pay for Medicare and Social Security for the baby boomers.
The national debt and those future liabilities could represent the next crisis, after this one. Unless we get the government's financial house in order, unless we find a way of paying for Medicare and Social Security, we'll be looking at a government debt crisis that could be just as painful – and just as avoidable – as the current financial meltdown.
The good news is that, unlike the global financial meltdown, we still have time to deal with the federal budget. Not much time, perhaps, but some. The key thing now is to cope with the current credit crisis and slumping economy without making our long-term budget problems too much worse. We probably can't avoid adding to the national debt to get through the current emergency. But we can at least make sure the money we're borrowing is used wisely: to stimulate the economy and make decisions that will strengthen us in the long run. And we can – we absolutely must -- start the hard work of fixing Social Security and Medicare before they get out of hand.
Otherwise, we may find a second fire has been smoldering while we're been preoccupied with putting this one out.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=51e3811a-8bb1-4878-86b9-b3e1e149481a)
