Debt debacle looms
People may not want to hear more from the debt doomsayers in these early days of summer. Understandably, they want someone to tell them how they’re going to get the economy back on track and make jobs more available.
But the debt question is critical for our economy. It isn’t some abstract issue to push off for future generations or view as only a problem in Europe. Three news items this week highlight that fact.
✔ The Congressional Budget Office said Tuesday that U.S. debt this year will reach its highest level, as a percentage of the gross doemestic product, of any time since World War II. If it continues unchanged, it will imperil long-term economic health, the budget office said.
✔ On Wednesday, Federal Reserve Board Chairman Ben Bernanke said U.S. policymakers must do something quickly about our “clearly unsustainable” debt or risk a possible fiscal crisis “that could have severe consequences for the economy.”
✔ To underscore that, a spokesman for Fitch Ratings said Wednesday that unless this country has a credible debt-reduction plan in place soon after November’s election, his company will probably downgrade the nation’s credit rating.
That would make it less likely that investors around the globe — especially China — will continue to buy U.S. bonds. And it will make it far more difficult for the country to borrow the short-term money it needs for everything from military readiness to domestic programs.
National leaders more concerned about the future of their country than their own political fortunes should be looking for ways to use both spending cuts and revenue increases to attack the debt.
The Simpson-Bowles plan comes to mind.