Can We Afford More Debt?
Posted on June 8, 2009
(CNN) -- We spend nearly as much on defense as the rest of the world combined. We spend more on health care than anybody else in the world. And we have a bigger national debt than anybody else in the world.Some experts are warning that if we keep spending like drunken sailors, we may lose our AAA credit rating, costing taxpayers billions more in higher interest payments.
The press widely reported that Treasury Secretary Tim Geithner went to China partly to convince the Communist government that we will bring our spending habits under control and that their investments are safe with us.
Meanwhile, in Congress, the Senate is busy readying a health care plan that will add more than a trillion dollars to a debt we can't afford. The big debate seems to be whether Sen. Max Baucus adds his public option plan in committee or in conference.
Can we continue to spend like this? No, we can't.
We can't continue to spend more on defense, health care and retirement programs than any other country while borrowing money from the rest of the world in order to finance it. Something has got to give.
The fastest-growing part of our budget comes from Medicare and Social Security. Because baby boomers are starting to retire, it is becoming harder and harder politically to reform these programs, but more necessary fiscally. But retirees don't have to worry about any changes to these budget-busting programs. Neither the Obama administration nor the Democrats have any intention of touching either program.
It troubles me that the president doesn't seem to acknowledge how his health care plans will make our fiscal problems even worse. He wants a public "option" health insurance program that will cost billions in money we don't have. The president has said that such an option would actually save money, through greater efficiencies, better preventive health care and fewer medical errors.
But as Maya MacGuineas pointed out in The Washington Post the other day, "Expanding insurance to cover the 46 million Americans who are uninsured would probably cost more than $100 billion a year -- more than the federal government spends on education, training, employment and social services combined. It is an immense undertaking at a time when the budget is under terrible strain."
A terrible strain, indeed.
So, where would this money come from?
According to the Obama administration, it would come partly from higher taxes on the rich. And believe me, that is one place where the Democratic-dominated Congress will look. But a trillion dollars over 10 years will not only soak the rich, it will suck the life out of the economy. And as we saw in California just last month, raising taxes is not something that a smart politician wants to do in a slowing, sagging, collapsing economy.
If Congress decides not to raise taxes to cover the price tag, it has three other choices. It can just put it on the tab, and have the next couple of generations pay for it. It seems unlikely that the Chinese or the bond rating agencies would like that very much, though.
Or it can cut spending on entitlements, like Medicare and Social Security. After all, that is where the money is. But while the president talks a good game about entitlement reform, I guarantee that any real plan he comes up with would be dead on arrival in Congress.
Or it can cut defense. The president did campaign on the idea that he can help pay for his agenda by ending the war in Iraq. Nice idea, but as we have found out already, talking about getting out of Iraq is a lot easier than actually getting out of Iraq.
While Defense Secretary Robert Gates is busy with a reform plan that will cut procurement costs, slash spending on missile defense research (just as the North Koreans launch another missile), and gut other weapons systems, it is unclear how much this will save, and most of those savings are earmarked for spending on veterans' health care.
None of these are good choices. But the first choice should be to stop spending on new programs that we simply can't afford.
In 40 years, when we wonder why we lost our huge defense advantage to the Chinese or the Indians (or the Brazilians for that matter), when we wonder why we can't get any more loans from the Germans or the Japanese, and when we wonder why 80 percent of our budget is dedicated to health care and retirement spending, we can look back on these days and thank those big-hearted, compassionate spenders who said "yes, we can," when they should have said, "no, we really can't."
The opinions expressed in this commentary are solely those of John Feehery.