Financial Change Will Come No Matter If Politicians Step Forward
Rather than viewing the recent slight uptick in the economy and leveling off in the national debt as a harbinger of a positive future, John Snow believes it is diverting national attention from the debt crises that continues to pose a mortal threat to out country.
Snow, who served as U.S. secretary of the Treasury from 2003 to 2006, delivered a lecture sponsored by the Burton K. Wheeler Center earlier this month on the campus of Montana State University in Bozeman. The lecture hall was filled to capacity. I wish all Montanans– in fact, all Americans–could have heard Snow’s message. It was point-blank frank and as chilling and crisp as a Montana October morning.
About two-thirds of federal spending is in entitlement programs, most significantly Medicare, Snow pointed out. While the national debt is now at a towering $17 trillion, that debt pales in comparison to the Medicare promise to baby boomers, which commits our government to an obligation of $70 trillion. Meaningful structural reforms needed.
To give this perspective, consider that the value of what we produce, our Gross Domestic Product, is about $16 trillion, which disturbingly, is now less than our debt. Interest on the debt is about $20 billion a month; government takes in about $250 billion a month. So, we aren’t exactly bankrupt quite yet. But our debt is still increasing at more than $700 billion a year.
Snow estimates that with baby boomers entering Medicare eligibility at the rate of 10,000 a week, nearly all other government services will be squeezed out of the budget within a generation. Unless there is serious reform.
The former Treasury secretary is sharply critical of our national leadership and the continual political brinksmanship it practices in failing to confront the debt problem. He pointed out that members of Congress, representing increasingly political safe congressional districts, are no longer open to ideas outside the conventional doctrines of their respective political parties. Unwilling to risk the ire of the constituents in their unrepresentative districts, they fail to act in the best interest of the country as a whole.
Snow said our leaders could fix these problems. A means test should be implemented preventing the wealthy from drawing on entitlement programs. Because of longer life spans, terms of eligibility for program benefits have to be adjusted.
The sequester in government spending has helped level off the increase in the debt. He suggested that the Democrats may agree to needed Medicare revisions if Republicans would lift the sequester on spending in certain areas. The hot potatoes have to be on the table. “Nothing that is necessary and far reaching can be accomplished by prolonging avoidance of the tough issues,” he said.
Snow is hopeful but not optimistic that our elected leaders will risk political trouble at home to reach a compromise necessary for the nation.
If changes don’t emerge from our political process, Snow says, change will come from the financial markets. Interest rates will increase as borrowers become more fearful of investing in our unsustainable debt.
It’s“simple arithmetic,” says the former Treasury secretary. “The accounting will come whether or not the politicians step forward and are accountable.”
Bob Brown is a former Montana secretary of state and state Senate president.