The budget debate and potential government shutdown is much more about a new vision for America revolving around the role of the federal government vs. the States, as opposed to whether we will cut spending by $33 billion or $61 billion in FY2011, for which a huge deficit of $1,650,000 trillion is being projected. Congressman Paul Ryan, Chairman of the House Budget Committee, has done something bold in reconfiguring how the federal government should be spending our borrowed money, especially on entitlements like Medicaid, Medicare, or Defense—in order to reduce the national debt, which is forecasted to reach $20 trillion in FY 2017. This is more than an academic exercise since interest will have to be paid on the public portion of the national debt held by U.S. citizens, pension plans, money market accounts, and a large part by foreign countries like China.
Inflation is beginning to rear its ugly head again. (The price of cotton has doubled to a $1.90 a pound in the last year alone.) Also, the Federal Reserve Bank may have to join China and the European Central Bank, which on April 7 raised its rate in spite of the fiscal problems faced by Portugal, Greece, Ireland, and Spain. We need to remember that under Jimmy Carter’s “stagflation” the prime rate reached an all time high of 21 percent. That today would mean almost immediate bankruptcy for the United States. (In my opinion, interest rates will rise, but not to that level.) Nevertheless, rates of 8 to 12 percent in the next five to ten years are not now out of the question. And, even 8 percent would raise the interest on the public portion of the national debt projected for FY2017 to almost $1 trillion versus the $200 billion that we are paying out in this fiscal year.
We need to control spending to reduce the continuing trillion-dollar plus budget deficits in order to bend the curve on the national debt downward. The politics of “kicking the can down the road” will not work anymore. In the last general election, the voters sent 87 new Members to the House with this message. Also, conventional thinking will not make a dent in the fiscal tsunami now threatening to hit us within ten years. Only a new vision for America will work, and that is what Congressman Ryan is trying to accomplish by taking the advice of President Barak Obama’s Debt Commission, which was not even considered by the President in his own budget for FY2012.
If nothing else, the talk of a shutdown will finally get the attention of the American people that we are facing dire fiscal straits. No one wants to see a shutdown, and in any case, even a temporary shutdown will not affect essential services or stop checks for entitlement benefits. But one must wonder why the House and the Senate was able to take a week-long recess during February to commemorate President’s Day when they knew there was so much unfinished business that could result in a government shutdown. Hopefully they will now have the sense to forego their own paychecks if the shutdown occurs.