The Coming Deficit Disaster
The president says he understands the urgency of our fiscal crisis, but his policies are the equivalent of steering the economy toward an iceberg.
By DOUGLAS HOLTZ-EAKIN
NOVEMBER 20, 2009
President Barack Obama took office promising to lead from the center and solve big problems. He has exerted enormous political energy attempting to reform the nation's health-care system. But the biggest economic problem facing the nation is not health care. It's the deficit. Recently, the White House signaled that it will get serious about reducing the deficit next year—after it locks into place massive new health-care entitlements. This is a recipe for disaster, as it will create a new appetite for increased spending and yet another powerful interest group to oppose deficit-reduction measures.
Our fiscal situation has deteriorated rapidly in just the past few years. The federal government ran a 2009 deficit of $1.4 trillion—the highest since World War II—as spending reached nearly 25% of GDP and total revenues fell below 15% of GDP. Shortfalls like these have not been seen in more than 50 years.
Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office's (CBO) analysis of the president's budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms. the rest
Presidents from Calvin Coolidge to John Kennedy to Ronald Reagan to George Bush understood that strong incentives are necessary to trigger rapid growth and hiring. Strong incentives, plus more investment in infrastructure, would no doubt have won the endorsement of Jim Owens of Caterpillar. He didn't get them from Obama, and my guess is he never will.