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Runaway Spending= Runaway Debt

June 30, 2009

IBD

29 June 09

Budget: The U.S. is on the fiscal road to ruin — with massive spending expected to create soaring deficits and mountains of debt. Don’t take our word for it. Just listen to the nonpartisan think tank that advises Congress.

‘Under current law,” said the Congressional Budget Office in its long-term budget outlook, released late last week, “the federal budget is on an unsustainable path — meaning that federal debt will continue to grow much faster than the economy over the long run.”

The CBO goes on to describe our rather bleak choices: “Keeping deficits and debt from reaching levels that would cause substantial harm to the economy would require increasing revenues significantly as a percentage of GDP, decreasing projected spending sharply, or some combination of the two.”

In other words, ready or not, we’re going to have to raise taxes or slash spending or a bit of both. The status quo is dead.

This shocking report usually would create a firestorm of debate. But with Congress and the White House already deeply involved in crafting new ways to bankrupt America — through cap and trade, nationalized health insurance and new across-the-board regulations on the financial industry, to name but a few — what’s shocking is how little attention is being paid to the future.

Without question, this Democratic-led Congress and White House have been the most fiscally reckless and irresponsible in our history. These captains of the Titanic know the iceberg looms in the murky distance, but instead of taking evasive action, they’re screaming “full steam ahead” as the ship readies for impact.

It won’t take long for us to hit the ice.

Let’s see. There’s $787 billion in stimulus, $700 billion in TARP spending and hundreds of billions in bailout funds for the automakers and Fannie Mae and Freddie Mac. This year alone the spending will approach $4 trillion, 117% above the $1.8 trillion spent in 2000.

This unprecedented increase will lead to expected deficits of $1.8 trillion this year and as much as $13 trillion through 2019. Over that time, the U.S. will go from having a fairly manageable debt load to one that threatens our financial stability.

According to the CBO, at the end of 2008, federal debt held by the public (see chart above) was 41% of GDP — far less than most countries in the European Union or Japan. But it won’t last. In just two years, the debt load will leap to 60% of GDP, and to 87% by 2020 and 181% by 2035 — just 25 years away.

Today, we spend about 1% of GDP on paying down debt. That’s estimated to rise to 2.5% by 2020. Soon these payments will start eating seriously into our budget, and we’ll be like hapless homeowners who put too much on their credit cards. We’ll be working just to pay our debts — or rather, our children and grandchildren will.

Almost all of this spending surge is due to entitlements. So it doesn’t even include possible programs like cap and trade and national health care. Medicare and Medicaid alone account for 80% of the growth of all entitlement spending over the next 25 years, rising from 5% of GDP to 10%. Now, imagine the rest of health care spending — about 13% of GDP right now — on the government’s tab, too.

The CBO says this debt growth will have a pernicious effect on the economy. “As investment (is) displaced by government debt, GDP (will) grow more slowly and eventually decline.”

Can there be anything more destructive of the bonds between generations than profligate spending that saddles an unborn generation with the debts run up by their parents?

This is a direct inversion of the age-old ideal of leaving your children better off than you were. We’ll be sending them back to an unhappy, unhealthy and unwealthy stage of America’s development.

We keep hearing Congress has no choice — this is what people really want. Is it? A recent Rasmussen Poll asked Americans: “Would you prefer a more active government with more services and higher taxes, or a smaller government with fewer and lower taxes?”

Some 66% responded they would prefer smaller government with less taxes; only 25% went for the big government option.

In short, the U.S. economy is being socialized through the back door against the will of its people. Our debts will soon be so large and burdensome that we will in effect be working most of our lives for the government in order to pay them off. And we won’t have any choice: a debt is a debt.

Here we thought indentured servitude and slavery were ended with the 13th and 14th Amendments to the Constitution in 1865 and 1868. Our clever leaders have found a way to get around this. They just call the shackles they’re fitting for our children “debts.”

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