Yes Virginia, There Is Still a Debt Problem

Republicans rarely talk about the deficit anymore. There are several reasons for the omission, most notably that over the past four years they’ve been able to help shrink the deficit from $1.4 trillion to $648 billion. They also quickly realized that they were falling into the same trap that Democrats already found themselves in – focusing on an issue that wasn’t directly related to jobs, which was by far the primary concern of voters.

But not talking about the deficit is its own sort of trap because it is, and likely will always be, a problem worthy of careful attention. Even though the deficit has grown smaller (though it’s still mindbogglingly enormous) that is but a temporary reprieve given the generous welfare system we offer and the demographic challenges we face.

As a result of those trends the Congressional Budget Office projects that over the next ten years the deficit is going to increase by $7.6 trillion. Without substantial change things will only get worse from there.

“CBO projects that, under current law, debt held by the public will exceed its current percentage of GDP after 2020 and continue rising,” the CBO writes in its annual Long Term Budget Outlook. “By 2039, under the extended baseline, federal debt held by the public would reach 106 percent of GDP – equal to the percentage at the end of 1946 and more than two and a half times the average percentage during the past several decades—and would be on an upward path. That trajectory ultimately would be sustainable.”

Debt-to-GDP ratio doesn’t produce a mind-blowing, nor a sexy-sounding number. But conceptually, it’s astounding. Within the next twenty five years we’re going to have a debt so large that if every person and every business dedicated their entire annual revenues to paying off the nation’s debt, they wouldn’t produce enough to cover it.

Why do we find ourselves on such an unsustainable path?

Well, as Robert Samuelson writes in the Washington Post, part of the problem is that we’re not being honest with ourselves about the size of our welfare system.

We Americans pride ourselves on not having a “welfare state.” We’re not like Europeans. We’re more individualistic and self-reliant, and although we may have a “social safety net” to protect people against unpredictable personal and societal tragedies, we explicitly repudiate a comprehensive welfare state as inherently un-American.
Dream on.

Call it a massive case of national self-deception. Indeed, judged by how much countries devote of their national income to social spending, we have the world’s second-largest welfare state — just behind France.

That statistics combines two measures – government social spending, such as unemployment insurance, old age assistance and government-provided health care, and payments channeled through private companies and subsidized by the government, like employer-provided health insurance. And it’s that second category—things that typically fall through the cracks of any conversation about government entitlements—that hides the true size of our fiscal problem by dousing it with nice-sounding colloquialisms.

“We have create a new vocabulary to validate our denial,” Samuelson writes. “From our ‘safety net,’ we distribute ‘entitlements’ that are not ‘handouts’ and don’t qualify as ‘welfare payments.’”

Republicans needn’t necessarily ratchet up the level of deficit and debt anxiety to their early-recession levels; that turned out to be a relatively unproductive long-term strategy. But this is an issue for which Republicans hold the moral high ground and, as a result, the trust of voters to deal with it. So long as the long-term situation remains untenable and a crisis remains on the horizon, Republicans must continue to be candid in their assessment of the problem and committed to using their power to lessen the threat.