OUR TICKING DEBT BOMB: THE GRAVEST THREAT FACING AMERICA
By Senator Tom Coburn
Admiral Mike Mullen former chairman of the Joint Chiefs of Staff is not exaggerating
when
he calls our debt our greatest national security threat. What makes his statement so remarkable is that for most of Americas history threats to our national security have been described in military terms: the size of opposing armies the number of ICBMs and in a post-9/11 world the determination of terrorists to kill civilians.
Sooner or later
our debt bomb" will go off.
America today faces one of the greatest threats to its existence since our founding. The threat does not come from any foreign army or terrorist network but from our own government and its unsustainable spending. If we dont change course in the near future most likely the next two years America as weve known it could soon be a shell of its former self.
We could face a sudden economic collapse worse than the Great Depression or we could enter an era of managed decline and waning influence.
What is certain is that maintaining our present course is a mathematical impossibility. If we ignore this problem we will condemn future generations to a lower standard of living with less freedom and less opportunity.
Red Ink Rising Isnt Fiction
Our military leaders of all people have no reason to downplay such threats so Admiral Mullens decision to identify Americas greatest vulnerability in economic rather than military terms should be
a wake-up call for every American. If Tom Clancy could capture our moment he might call it Red Ink Rising." In a very real sense the threat from borrowing from countries like China is greater than the threat of war with China.
Sooner rather than later a major fund or government will just decide one day that buying U.S. debt is a bad bet. And with one gust of wind the house of cards will come crashing down.
We need to face the facts. America is already bankrupt. We may not believe it or feel it yet. But we are effectively bankrupt. Our debt now exceeds the size of our entire economy. Our payments on our obligationsour unfunded liabilitiesexceed our income as far as the eye can see. No amount of obtainable growth or tax revenue will be enough.
Reimagine What Government Can Do
There simply is no possible way we can finance our long-term liabilities without fundamentally reimagining what government can do in the 21st century. If current patterns hold well hear increasingly dire warnings and more earnest promises to do something but no one will act decisively until we experience more economic pain. A debt crisis would likely move through four stages.
Stage 1: Congress tries to maintain the status quo on spending and entitlements.
Stage 2: The United States faces additional credit downgrades.
Stage 3: Interest rates markedly increase harming consumers and sending interest payments on the national debt soaring.
Stage 4: Inflation soars and the value of the dollar declines.
In this final stage borrowing enough money to fund our military and other programs will become much more expensive. Because we will be spending more on interest payments it will be virtually
impossible to balance our budget with spending cuts and revenue increases. The hole will be too deep and the sides too steep to climb out.
Working Families Watch Out
Meanwhile the so-called solutions that government would turn to at this point would make the problem much worse. Politicians would essentially try to save themselves by destroying the middle class with a tactic leading economists Carmen Reinhart and Kenneth Rogoff call financial repression." Financial repression happens when to solve a debt crisis the government uses tools that rob working families. One of the time-honored tools of financial repression is the debasement of currency by inflation.
Inflation will make government debt seem smaller by shrinking the value of the dollar. Yet for individual Americans inflation will be an insidious hidden tax increase that will make everything you buy more expensive and everything you own worth less. If our government tries to inflate its way out of a debt crisis much of your life savings will be wiped out.
Meanwhile other nations will see this as their chance to make what could be a decisive move against the dollar and the value of the dollar would fall even further.
Finally the bottom would fall out of the middle class. Unemployment would soar while the cost of living would increase. Real wage growth has been stagnant for years. It will be the middle class and lower-income families that pay the price for Washingtons refusal to act.
Statesmen Needed
If Admiral Mullen is correct that our debt is our greatest national security threat doing nothing is a recipe for mutually assured destruction. The reality is that doing nothing to solve the problem equates to both a tax increase and a benefit cut for seniors and the poor.
Doing nothing violates the core principles of both parties while solving the problem is consistent with those values. Doing nothing is the real betrayal and the heresy.
The big question facing America now and in the foreseeable future is whether we are going to defuse a
debt bomb that has put our very survival at risk.
From my vantage point having spent hundreds of hours with people who have a sacred responsibility to solve this problemfrom the president to congressional leadersI believe a consensus for a solution already exists in the country and in Washington.
But a real solution will never fit into an election-year strategy. In Washington the moment to do what is right is never today. It is always a mirage just beyond the horizon of the next election. It comes down to a question of political will and courage. Will we be career politicians or will we be statesmen?
The good news is there is a growing cadre of members of Congress in Washington who are ready to go into battle and to lay down their political lives for their country. With a little leadership and courage we can get there sooner than you think.
Senator Tom Coburn (M.D. University of Oklahoma) is in his 2nd term as a Republican Senator from Oklahoma. This article is adapted from his new book
The Debt Bomb: A Bold Plan to Stop Washington from Bankrupting America.
