Experts warn of crisis as two U.S. deficits collide
I found this alarming article over at the Kansas City Star--thought some of you may be interested to see what a couple of experts have to say about our deficits.
The biggest unknown about America’s next economic meltdown is not “if” but “when” it will come.
The next biggest unknown is how bad the crisis might be.
The best case, according to public-policy experts speaking Monday in Kansas City, is that the nation’s ballooning debt will be manageable — if we quadruple taxes, slash Social Security and Medicare spending beyond the bone, or find some combination of the two before a meltdown starts.
And the worst case?
“Over the long run, I believe the republic is at risk. It’s that serious,” David Walker, the U.S. comptroller general, said at a business breakfast Monday.
Walker is one of several public-policy specialists engaged in an effort by the nonpartisan Concord Coalition to warn the nation of the consequences of its record-large and growing governmental and consumer debt. In addition to meeting with more than 80 business and community leaders at a Ewing Marion Kauffman Foundation breakfast, Walker and the other coalition participants presented their case to an audience at the Metropolitan Community College-Penn Valley Campus.
The Kansas City stops are the seventh in what the coalition calls its national Fiscal Wake Up tour, co-sponsored here by The Kansas City Star editorial board, the Kauffman Foundation and the Stinson Morrison Hecker law firm.
The U.S. currently confronts a series of deficits that threaten both the nation’s role in the world and its standard of living, Walker said.
One is the federal budget deficit, now a record $760 billion paid or promised single-year expenses and more than $46 trillion with long-term promises for Medicare, Social Security and the like figured in.
“That translates to a tax burden of about $375,000 for every full-time worker in the country,” Walker said.
That’s compounded by a second great deficit, in Americans’ personal savings rate, which last year turned negative for the first time since 1933. That means far fewer aging Americans will have as many resources to fall back on when Medicare or Social Security become stretched.
Foreign investors have been bankrolling the nation’s excessive spending by snapping up U.S. debt, which helps push the nation’s balance of payments deficits above $726 billion, twice the level of just four years ago.
The potential crisis becomes acute when those overseas investors, including China, Japan, South Korea, stop buying U.S. debt, said Bob Litan, vice president of research and policy at the Kauffman Foundation and a senior fellow at the Brookings Institution.
Rapidly rising interest rates and plummeting values for the dollar could send the U.S. into a deep recession, and U.S. policymakers would need to cut spending at a time when consumers need more of it for relief.