When Brookings and Heritage mesh on something – it’s hard not to agree with most of their points.

www.washingtonpost.com/wp-dyn/content/article/2005/05/17/AR2005051701238_pf.html


Almost Unnoticed, Bipartisan Budget Anxiety
By Dana Milbank

Wednesday, May 18, 2005; A04

The timing could not have been more apt. On the eve of a titanic partisan clash in the Senate, eggheads of the left and right got together yesterday to warn both parties that they are ignoring the country's most pressing problem: that the United States is turning into Argentina.

While Washington plunged into a procedural fight over a pair of judicial nominees, Stuart Butler, head of domestic policy at the conservative Heritage Foundation, and Isabel Sawhill, director of the left-leaning Brookings Institution's economic studies program, sat down with Comptroller General David M. Walker to bemoan what they jointly called the budget "nightmare."

There were no cameras, not a single microphone, and no evidence of a lawmaker or Bush administration official in the room -- just some hungry congressional staffers and boxes of sandwiches from Corner Bakery. But what the three spoke about will have greater consequences than the current fuss over filibusters and Tom DeLay's travel.

With startling unanimity, they agreed that without some combination of big tax increases and major cuts in Medicare, Social Security and most other spending, the country will fall victim to the huge debt and soaring interest rates that collapsed Argentina's economy and caused riots in its streets a few years ago.

"The only thing the United States is able to do a little after 2040 is pay interest on massive and growing federal debt," Walker said. "The model blows up in the mid-2040s. What does that mean? Argentina."

"All true," Sawhill, a budget official in the Clinton administration, concurred.

"To do nothing," Butler added, "would lead to deficits of the scale we've never seen in this country or any major in industrialized country. We've seen them in Argentina. That's a chilling thought, but it would mean that."

Each of the three had a separate slide show, but the numbers and forecasts were interchangeable.

Walker put U.S. debt and obligations at $45 trillion in current dollars -- almost as much as the total net worth of all Americans, or $150,000 per person. Balancing the budget in 2040, he said, could require cutting total federal spending as much as 60 percent or raising taxes to 2 1/2 times today's levels.

Butler pointed out that without changes to Social Security and Medicare, in 25 years either a quarter of discretionary spending would need to be cut or U.S. tax rates would have to approach European levels. Putting it slightly differently, Sawhill posed a choice of 10 percent cuts in spending and much larger cuts in Social Security and Medicare, or a 40 percent increase in government spending relative to the size of the economy, and equivalent tax increases.

The unity of the bespectacled presenters was impressive -- and it made their conclusion all the more depressing. As Ron Haskins, a former Bush White House official and current Brookings scholar, said when introducing the thinkers: "If Heritage and Brookings agree on something, there must be something to it."

Yet that is not how leaders of either party talk. Former Treasury secretary Paul H. O'Neill recounted how Vice President Cheney told him that "deficits don't matter." President Bush projects deficit reductions in the coming few years but ignores projections that show them exploding after that. And Democrats, fighting Bush's call for cutting Social Security benefits through indexing changes, are suggesting that only tinkering with the program is indicated.

The congressional staffers, accustomed to sitting on opposite sides of the room in such events, seemed flummoxed by yesterday's unusual session in the Rayburn House Office Building. One questioner suggested Republicans are to blame for multiple tax cuts; another implied the problem is a Democratic appetite for spending. The bipartisan panel would not be goaded. "I'm willing to talk about taxes if you're willing to talk about entitlements," Butler offered.

Not surprisingly, the Heritage and Brookings crowds don't agree on an exact solution to the budget problem, but they seem to accept that, as Sawhill put it, "you can't do it with either spending or taxes. Eventually, you're going to need a mix of the two." Butler wants taxes, now at 17 percent of GDP, not to exceed 20 percent. Sawhill prefers 24 or 25 percent.

But such haggling seems premature when both parties still deny the problem. "I don't think we're there yet," Walker said. "The American people have to understand where we are and where we're headed."

And where is that? "No republic in the history of the world lasted more than 300 years," Walker said. "Eventually, the crunch comes."

He wasn't talking about filibusters.

Walker put U.S. debt and obligations at $45 trillion in current dollars -- almost as much as the total net worth of all Americans, or $150,000 per person. Balancing the budget in 2040, he said, could require cutting total federal spending as much as 60 percent or raising taxes to 2 1/2 times today's levels.

Alright, gives me about 20 - 30 years to stock up.  

Quoted: Walker put U.S. debt and obligations at $45 trillion in current dollars -- almost as much as the total net worth of all Americans, or $150,000 per person. Balancing the budget in 2040, he said, could require cutting total federal spending as much as 60 percent or raising taxes to 2 1/2 times today's levels. Alright, gives me about 20 - 30 years to stock up.

+1

My buddy just came back from Thailand, stopped in Narita Tokyo for a layover paid $14US for a Starbucks Latte, get ready boys gonna be a rough ride....

Quoted: My buddy just came back from Thailand, stopped in Narita Tokyo for a layover paid $14US for a Starbucks Latte, get ready boys gonna be a rough ride....

That's because Japan is an expensive place, and airports are expensive places, and the currency conversion has been sucking for the last few years.

On the other hand, if your buddy had bought that latte on the street in Thailand -- not from Starbucks, but from some local outfit -- he probably would have paid the equivalent of 25 cents.

There are plenty of nice places to retire, and Thailand might very well be one of them.  Something to think about in, oh, 2030 or thereabouts.

I'd like to see the Congress get into fist fights like the legislature in Taiwan. At least it would be entertaining.

Quoted:

Yup  

In my mind this is actually good.
It gives me plenty of time to save and stockpile, and eventually they will almost certainly have to cut SS.

Will you all you believe me now?

You wanna take a look at your future? Start studying what happened here in the 90s here and what happened later...