In Part I, we reflected on the implications of President Obama’s January 11th request to Congress to approve another increase in the “federal debt ceiling” – an increase of $1.1 trillion. We also described the most common measure of national financial health – the “Debt-to-GDP” ratio. The federal government itself has reported that our own Debt-to-GDP ratio now exceeds 100%, which brings us into a somewhat exclusive club of nations whose debt is considered by experts to have gotten out of hand. A number of those nations (such as Greece and Italy) are the subject of daily references in the news regarding the perilous condition of their finances – so perilous as to cause some observers to call into doubt their future within the European Union. We also listed the estimated Debt-to-GDP ratio of key European nations whose finances have become the subject of regular headlines:
Keep in mind that Greece, Italy, and Ireland have already adopted, and are engaged in, austerity measures – that is, they have intentionally accepted cutbacks designed to bring revenue and expenses closer in line. Even the United Kingdom (not currently among the nations being castigated for fiscal irresponsibility) has adopted austerity measures. Meanwhile (as we know) the United States has repeatedly failed to accomplish any such “success” in financial discipline. That is what former Senator Obama could certainly label “a failure of leadership.”
This failure is not caused by a lack of workable ideas. The tragic truth is that the President himself created and authorized a commission to wrestle with the complex issues involved in U.S. federal finances – the Simpson-Bowles Commission – in 2010. Their report (subtitled “The Moment of Truth”) offered viable (painful, but viable) steps to bring our national debt in balance within ten years. Alas, the President ignored the report, as did Congress.
Meanwhile, our nation’s financial hole has deepened by leaps and bounds. In 2001, the national debt was at 33% of GDP. At the time of the release of the Simpson-Bowles report, it stood at 62%. The “experts” at the Congressional Budget Office forecast that our debt would not reach the level of 100% of GDP until 2020. They were dramatically wrong; but that is governmental accounting for you! As you can see, the level of Debt-to-GDP surged by 40% in this past year under President Obama.
As a nation, we face a myriad of important issues… most of which will be hotly debated in the months between now and November. However, none of those issues can be considered as foundational for our future as the financial strength of our nation. I suggest that you listen, and listen with a discerning and critical ear, to what the candidates say (and “promise”) during the campaign concerning this issue. We cannot afford any more years of what then Senator Obama bluntly and forcefully called “a failure of leadership.” http:// http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf