If the United States continues to rapidly accumulate debt with no end in sight, we risk severely destabilizing bond and currency markets, derailing the economic recovery, reducing our capacity for public investment and national security, and undermining our leadership abroad. That was the message delivered yesterday by former Treasury Secretaries James A. Baker and Robert Rubin, as they presented a candid assessment of the nation’s treacherous fiscal road ahead to a bipartisan group of former elected officials. Secretary Rubin exhorted the need to take action soon:
“The longer we wait to act, the deeper the hole becomes, and the harsher and more protracted responding measures will have to be.”
In hopes of building support for a grand bargain on deficit reduction, former Senators Sam Nunn (D-GA) and Pete Domenici (R-NM) on Wednesday co-chaired this influential group of policymaking veterans as they kicked off the first of four forums on America’s fiscal challenge. The new initiative, Strengthening of America?Our Children’s Future, is a joint effort of the Center for Strategic and International Studies (CSIS), The Concord Coalition, and the Bipartisan Policy Center (BPC), among other organizations. Senator Nunn said that the former lawmakers had come together because:
“We believe there are feasible and responsible solutions that we can pursue to protect our children’s future ? if we work together. To succeed, however, our elected leaders will have to summon more political courage and be willing to engage the public in an honest dialogue about the magnitude of the challenge and the trade-offs involved in the various solutions.”
Secretaries Baker and Rubin were featured at yesterday’s event, and both agreed that America’s precarious fiscal position weakens business confidence and stunts investment. Secretary Baker called the interest on the debt “a ticking time bomb” and Secretary Rubin said that the consequences of inaction would be ruinous. Within seven years, the federal government will be spending more on interest payments than on national defense, and almost as much as on Medicare. By 2024, if nothing is done, interest payments on the federal debt would surpass $1 trillion per year.
Both secretaries stressed that the debate between economic growth and deficit reduction is a false choice. Policymakers can prioritize steps to boost the nation’s sluggish economy in the short-term, while still putting in place a comprehensive plan to simplify the tax code and reign in the drivers of our long-term debt. We need both, and they will feed off of one another in a virtuous cycle.
Secretary Baker, pointing to bipartisan coalitions of the past that tacked issues such as tax reform and the solvency of Social Security, said:
“A broad, bipartisan agreement is going to be necessary if we are going to be able to stabilize our debt. We cannot continue to move forward with a debt-to-GDP of over 100% as far as the eye can see.”
Secretary Rubin emphasized the trade-offs at stake:
“There are many in one party that think we shouldn’t increase revenues and many in the other party that think we shouldn’t reform entitlements. I think both are absolutely necessary. Those who reject the need for revenue increases and those who reject the need for entitlement reform have the obligation to show the full specifics of an alternative whose substantive effects are fully understood and is politically doable.”
Panelists – including former Senator and BPC Senior Fellow Byron Dorgan (D-ND) and former Agriculture Secretary and BPC Senior Fellow Dan Glickman – argued that the energy both sides spend on assigning blame would be better served fostering a serious compromise. Time is running out ahead of the fiscal cliff, and a punt would be damaging to our markets and global standing. As Senator Domenici, also a BPC senior fellow, noted in his remarks:
“The debt is not a Republican debt. It is not a Democratic debt. It is an American debt. The only solution is an American solution?one where leaders of both parties band together for a better future, in defiance of the polarized ideologies that dominate today.”
The initiative’s second forum will be held on Monday, September 17 at CSIS. Speakers include former Defense Secretary Robert Gates, Admiral Michael Mullen, former Director of the Office of Management and Budget and co-chair of the BPC Debt Reduction Task Force Alice Rivlin, and Fiscal Commission Co-Chairs Erskine Bowles and Senator Alan Simpson. Stay tuned for more details and registration.
Watch video of the event here.
Learn more about the Strengthening of America project here.