The simplest way to prevent endless fights over increases to the debt ceiling is to reach an agreement on spending. Easier said than done.
While both sides appear committed to preventing a default of the U.S. government, they have yet to address what’s driving the endless debt increases in the first place — overspending.
Our debts and deficits are piling up fast. In fact, we’ve already blown through the last $2.1 trillion debt ceiling increase in just 17 months. How much longer can we keep this up before the house of cards collapses?
Some folks say we can tax our way out of this problem. Not possible. Ending all the upper-income tax cuts would pay for just nine days of annual spending. Nine days. You could confiscate 100 percent of the earnings of couples making more than $1 million and still not come anywhere close to solving our deficit problem. The recent fiscal cliff deal pairs major tax hikes with virtually no spending cuts. No amount of new revenue or higher taxes can solve our fiscal challenges without real spending controls.
So it’s time to face reality. The entitlement programs written and designed for an earlier era must be revised. According to the Congressional Budget Office, virtually 100 percent of the projected increase in budget deficits over the next 75 years comes from rising Social Security, Medicare, Medicaid and other mandatory spending. If left unchecked, this spending soon will consume every dollar the federal government collects, leaving nothing for education, national defense or other essential programs.
Let me point out that we’re not talking about cuts in absolute terms — we’re simply talking about slowing the rate of increase. This can be achieved with reasonable adjustments phased in over a number of years.
Let’s face another reality — we need to raise the debt ceiling. Even suggesting that we could default is playing with fire. Businesses would be more reluctant to hire and invest. Our AAA credit rating would be at risk. An actual default would be a disaster, destroying the full faith and credit of the United States, spiking interest rates and creating massive economic uncertainty.
Congress and the president must use a short-term extension of the debt ceiling to negotiate spending cuts and entitlement reform that will restore fiscal balance and put us on a sounder financial footing. It’s no exaggeration to say that the country’s economic future depends on it.
— Tom Donohue is president and CEO of the U.S. Chamber of Commerce. The opinions expressed are his own.