Bill Beach came into Wheeling to speak about the debt and the deficit, and what the fiscal policy of nearly every president and party of recent memory. We will have a video &/or mp3 of the event (we hope) in the future.
The Wheeling Intelligencer posted a story about the event here:
“This is bipartisan debt. Studies show that it doesn’t matter if we have Republicans or Democrats in the White House and Congress, the debt continues to grow. However, Obama’s budget would increase debt by 26.3 percent of the gross domestic product … levels of debt not seen since World War II.”
Beach, who is the Heritage Foundation’s chief “number cruncher,” said figures show that the United States spent $182 billion to bail out AIG, $700 billion for TARP (Troubled Asset Relief Program) and $787 billion in stimulus funding.
Coupled with devaluation of the U.S. dollar, the growth of federal spending and increased utilizing of government programs can only mean the next generations will have a reduced quality of life, as debt repayment will affect everyone, Beach warned.
Beach predicts that the burden of debt will cause the next generation and their children to marry at a later age, have fewer children, buy their first home at age 40, not 30, and have “a lifetime of physical assets much less than the current generation.”
“Unless we can reduce the debt in this country, the American dream may not be a reality for our children and our grandchildren,” he added.
Beach said there are four ways the national debt can be handled:
- raising taxes,
- lowering future spending,
- inflation or dollar devaluation or
- debt repudiation.
However, he said the only practical way to bring down the debt is to reduce spending.
I have more pics at the BB&T site here.
In the WSJ on 8 February, there was this opinion piece, which seems to coincide with the message of the Beach talk. Glenn Hubbard, dean of the Columbia School of Business, writes:
Moody’s Investors Service’s warning last week that the AAA credit rating of the United States is in jeopardy raises fresh concern about the nation’s fiscal health. The question to ask about the president’s eye-popping budget, also rolled out last week, is whether it prepares the country for its future—or shackles it to past decisions that our leaders would rather not confront.
President Obama’s blueprint gave us a federal budget deficit for fiscal year 2010 of $1.6 trillion, about 10.6% of GDP. While one expects bigger budget deficits in a downturn, the administration expects the deficit and debt buildup to persist. By 2013, it forecasts that deficits will bring about a debt-to-GDP ratio of 72%, unprecedented in our experience except during a major war.
The problem is spending. Despite Mr. Obama’s words about restraint, the new budget proposes more spending—1.8% of GDP for 2011 to be precise—and a higher level, roughly one percentage point of GDP higher, in subsequent years.
Debates about the budget traditionally revolve around these numbers. There is another way to look at the federal budget, however, and that is to focus on its effect on our economic health, not just the government’s fiscal health. Focusing on economic health means setting our sights on productivity growth—our future living standards.
Hubbard contends that we cannot rely on raising taxes to take care of this problem. If we raised taxes, we would shrink GDP. We are going to need spending reductions, and soon, we will be forced to reduce spending. Social Security, I would say, and from all reasonable accounts, looks to be a target in the near future. Now you know why economics is the dismal science:
Our present income tax already relies very heavily on revenue from high earners; the top 1% pay well over one-third of federal income taxes. Mr. Obama’s budget increases the reliance. But we cannot count “taxes on the rich” for deficit reduction, health-care expansion and funding entitlements while ignoring the effect of those tax increases on investment, innovation and growth.
To raise the revenue for the president’s welfare-state ambitions, the tax increases must necessarily be broad-based, as, for example, with a broad-based consumption tax. A useful start would be to calculate—and present to the public each year—the broad-based consumption tax required to pay for higher spending.
In the end, the reason to get the nation’s fiscal house in order is less about deficits or debt as percentage points of GDP than about our future. We need a healthy, dynamic and innovative economy. We need a safety net for those buffeted by change. And we need the flexibility to increase support for national defense and other new domestic priorities.