(Sept. 2) What should be one of the two or three most pressing matters of this year’s presidential campaign is being ignored by both major candidates. It is admittedly a tough subject to address, but it can be simplified by thinking of an ocean liner and an elephant.
The issue is that of federal debt. The ocean liner and elephant come from somewhat hoary aphorisms, and you can choose whichever one works best for you. We all know that “it takes a while to turn a ship around,” and more so for a huge ocean liner — or for a dangerously indebted government. And, of course, the way one eats an elephant is one bite at a time. In the case of the dangerously large federal debt, the job is so big that it will take one bite at a time for an elephant, plus a hippopotamus, too.
Forgive the dual metaphors, but they each apply. Before applying these aphorisms as part of a federal debt-management plan, let’s understand the nature of the problem. Most economists look at government debt less in terms of raw numbers than as a percent of the entire economy, or GDP. The higher the debt-to-GDP ratio (I’ll henceforth just capitalize it as the “Ratio”), the more worrisome. The World Bank once advised that a Ratio higher than 77% for an extended period could be a “tipping point” into a bad economy, and most economists long have believed that anything above 100% starts to raise the specter of major systemic upheaval….
For seven straight years, we’ve been above the 77% “tipping point,” and for four straight years, we’ve been right around the 100% danger point. The wealthy U.S. now ranks among the 10 worst Ratios in the entire world.
Even worse, the unfunded future liabilities of the federal government, including statutory promises for Social Security and Medicare, will push the Ratio to more than 230% within 30 years. … Herewith, then,
a series of interim policy changes that won’t even come close to solving the problem but would buy an extra five or six crucial years before the debt ratio explodes into panic-inducing territory. To switch back to the other metaphor, we can’t eat the elephant unless we start with the first few bites. Here, then, are some helpful, time-buying bites.
First, Congress and the president can bite into the part of government they most readily control, namely the domestic discretionary appropriations they must pass each year…. [The full, policy-heavy column is at this link.]
