Next debt crisis may ‘start in Washington’
“We need urgent action to forestall the next financial crisis. I fear that one will start in Washington,” wrote Sheila Bair in the Washington Post on Friday.
In a sobering assessment, she pointed out that the federal debt has doubled to $14 trillion in just seven years. “This explosive growth in federal borrowing is a result of not just the financial crisis but also government unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit,” she wrote.
Expenditures for Social Security, Medicare and Medicaid combined will account for 45 percent of primary federal spending—27 percent higher than 35 years ago. Entitlement spending is expected to triple by 2035. Defense spending and generous tax subsidies for housing and health care have also put tremendous strain on government finances.
“Unless something is done, federal debt held by the public could rise from a level equal to 62 percent of gross domestic product this year to 185 percent in 2035. Eventually, this relentless federal borrowing will directly threaten our financial stability by undermining the confidence that investors have in U.S. government obligations.”
Bair continued, “[W]e must never take public or investor confidence for granted. In the end, that confidence is only as great as the resolve shown by our government in identifying emerging risks and taking concerted action to head them off. Excessive government borrowing poses a clear danger to our long-term financial stability.”
What’s needed to sort out this mess, the Economist recently wrote, is political courage. “In the long term economics will tell: Unless it changes course, America is heading for a bust. If Mr. Obama lacks the guts even to start tackling the problem, then ever more Americans, this paper and even … foreign summiteers will get ever more frustrated with him.”
Last week, co-chairman of a special commission on deficit reduction Alan Simpson said he is anticipating a bloodbath in April when politicians vote on whether to raise the national debt ceiling. Paul Krugman wrote in the New York Times that this is “one more piece of evidence that our nation is in much worse shape, much closer to a political breakdown, than most people realize.”
In August, we quoted British historian Niall Ferguson, who wrote that “the U.S. is on an unsustainable fiscal course, with no apparent political means of self-correcting.” America is facing political breakdown at a time when it needs resolute leadership the most. As Isaiah 3 prophesies, the mighty and the honorable men have all but vanished from our society.
However, even if America had a strong leader today, “no amount of change in human government will fix what is already broken. Very soon now, we can expect the accelerating pace of prophetic events to fully expose the fact that mortal men cannot solve the colossal problems facing America,” columnist Stephen Flurry wrote earlier this month. “Jeremiah 17 says it is a curse to place our faith and trust in men. There is no hope in man! Our only hope is in the great Creator God who will soon set up and establish His Kingdom to rule over all the Earth during the wonderful World Tomorrow.”
