A month ago, reflecting on George W. Bush’s near-doubling of the national debt, budget hawk David Walker told me that Bush was “the most fiscally irresponsible president in American history.—
[IMGCAP(1)]This week, reflecting on the possibility that Barack Obama could nearly redouble the debt, Walker said that Bush holds the irresponsibility record “to this point.—
The former Comptroller General and now-president of the Peter G. Peterson Foundation and star of the movie “I.O.U.S.A.,— Walker said it’s too soon to tell whether Obama will match Bush in irresponsibility, but the signs are not encouraging.
“All [Obama’s] words are good— about controlling the debt, he said, “but his budget proposes no transformational changes. His programs are all debt-financed.—
Walker said he trusts the Congressional Budget Office’s just-issued estimates of deficits and debt more than those from Obama’s Office of Management and Budget.
The CBO shows the nation’s public debt — not counting borrowing from Social Security and other trust funds — rising from $5.8 trillion to $10.2 trillion by 2014 and $15.1 trillion by 2019.
During the Bush years, it grew from $3.3 trillion in 2001 to $5.8 trillion this year — from 24 percent of gross domestic product to 40.8 percent last year and 56.8 percent this year.
The CBO estimates that Obama will preside over an increase to 71.4 percent during his first term and 82.4 percent by 2019.
And Walker says those numbers understate the true burden of debt on future generations.
When borrowing from trust funds is included, gross federal debt went from $5.8 trillion in 2001 to $12.6 trillion this year.
The CBO did not calculate the gross debt, but Obama’s budget shows it rising to $17.1 trillion in 2013 and $23.1 trillion in 2019. The 2019 figure will be more than 100 percent of the estimated gross domestic product — the largest percentage since just after World War II.
“And in those days,— Walker said, “we owed that debt to ourselves. Now we owe it to foreigners, mainly the Chinese, who are firing shots across our bow that they may not keep acquiring our debt.—
Already, the Federal Reserve is buying U.S. Treasury bills to keep interest rates down. If foreigners refused to buy — as occurred with British debt on Wednesday — interest rates would surge, damaging prospects for economic growth and investment.
Republicans have been charging — almost chanting — that Obama’s budget “spends too much, taxes too much and borrows too much,— but they shamelessly ignore Bush’s irresponsibility and their own, when they were in control of Congress.
On the other hand, contrary to Obama’s assertion in his press conference Tuesday, House Republicans will present an alternative budget, but it hasn’t been made public yet.
Meanwhile, moderate Democrats led by Senate Budget Chairman Kent Conrad (N.D.) plan to cut $600 billion from Obama’s five-year budget, reducing the borrowing requirement from $4.4 trillion to $3.8 trillion.
To Walker, the key cost not addressed in any budget is the growth of entitlement programs, chiefly Social Security, Medicare and Medicaid.
Obama has held an “entitlement summit,— has promised not to “kick the can down the road— and has pledged to “kill government programs that don’t work,— but even he admitted in his press conference that he has not supplied details.
Moreover, Walker said, health care reform needs to be a major part of controlling entitlements, “but it has to have a positive effect on our fiscal position.— He said, “Obama needs to demonstrate how he’ll control health care costs.—
Obama’s budget contains a $685 billion “reserve fund— for health care paid for with taxes on higher-income filers, but the cost of insuring 50 million people likely will be at least double that, Walker said.
“When [White House Chief of Staff] Rahm Emanuel said that a crisis shouldn’t go to waste, he could have meant that it’s an opportunity to put our fiscal house in order,— Walker said.
“Or it could mean that, once the deficit hits $1.85 trillion, as it does this year, you can keep spending and put it on a credit card. That’s what it looks like to me.—
Both the OMB and the CBO show Obama producing significant deficit reductions in his first term — more than fulfilling his promise to cut the deficit in half.
But this year’s $1.85 trillion deficit — an astounding 13 percent of GDP — gives him lots of room. Obama’s budget shows the deficit dropping to $300 billion by 2013 and the CBO shows it at $658 billion.
After that, however, it grows again — to $423 billion in Obama’s estimate, to more than $1 trillion in 2018, according to the CBO.
Walker is one of many budget experts urging creation of a bipartisan “fiscal future commission— to recommend ways to bring entitlement spending under control and require Congress to vote on them.
Reps. Jim Cooper (D-Tenn.) and Frank Wolf (R-Va.) have reintroduced legislation creating such a commission, and Sens. Joe Lieberman (ID-Conn.) and George Voinovich (R-Ohio) are expected to sponsor a companion. Conrad also favors a commission.
Walker told me he’s worried not only about the nation’s fiscal future, but also about its monetary policy.
“The Federal Reserve’s balance sheet has tripled bailing out financial institutions,— he said. “Now it’s buying long-term government debt. It’s printing money, which can lead to inflation, a weak dollar and high interest rates.
“Somehow, it’s got to unwind all this. Our entire economic ship of state has got to be turned around from borrowing to saving. It’s going to be hard.—
Obama, he said, “has got to take concrete steps to demonstrate that his promises have meaning and reassure China and other creditors — and do it soon.—
Right now, though, “where Bush about doubled the national debt, CBO shows that Obama could be on track to do the same — and at much higher numbers. It’s not a record he should want to repeat.—