June 26, 2005

A Glide Path to Ruin

The biggest risk we Americans face to our way of life and our place in the world probably doesn't come from Al Qaeda or the Iraq war.

Rather, the biggest risk may come from this administration's fiscal recklessness and the way this is putting us in hock to China.

"I think the greatest threat to our future is our fiscal irresponsibility," warns David Walker, the comptroller general of the United States. Mr. Walker, an accountant by training, asserts that last year may have been the most fiscally reckless in the history of our Republic. Aside from the budget deficit, Congress enacted the prescription drug benefit - possibly an $8 trillion obligation - without figuring out how to pay for it.

Mr. Walker, America's watchdog in chief and head of the Government Accountability Office, is no Bush-basher. He started out his career as a conservative Democrat, then became a moderate Republican and has been an independent since 1997.

Now he's running around with his hair on fire, shrieking about America's finances. Well, as much as any accountant ever shrieks.

I asked Mr. Walker about Paul Volcker's warning that within five years we face a 75 percent chance of a serious financial crisis.

"If we don't get serious soon," Mr. Walker replied, "it's not a question of whether it'll come, but when and how serious."

Joseph Stiglitz, the Nobel-winning economist, says he is also "very worried."

"I find it very difficult to know how to put a number" on the probability of a crisis, he added, "but there's a widespread sense in the market that there is a substantial chance."

Another issue is that three-fourths of our new debt is now being purchased by foreigners, with China the biggest buyer of all. That gives China leverage over us, and it undermines our national security.

On fiscal matters both parties have much to be ashamed of, but Republicans should be particularly embarrassed at their tumble. Traditionally, Republicans were prudent, while Democrats held great parties. But these days, the Bush administration is managing America's finances like a team of drunken sailors, and most Republicans keep quiet in a way that betrays their conservative principles.

Senator Chuck Hagel, a Republican, wrote a couple of years ago: "Republicans used to believe in balanced budgets. ... We have lost our way." He's right.

Critics have pounded the Bush administration for its faulty intelligence in the run-up to the war in Iraq. But President Bush peddled tax cuts with data that ultimately proved equally faulty - yet the tax cuts remain cemented in place.

"I hope you will join me to pay down $2 trillion in debt during the next 10 years," Mr. Bush said then, between his calls for tax cuts. "That is more debt, repaid more quickly, than has ever been repaid by any nation at any time in history." His budget message that year promised that the U.S. would be "on a glide path toward zero debt."

Oh?

More than two centuries of American government produced a cumulative national debt of $5.7 trillion when Mr. Bush was elected in 2000. And now that is expected to almost double by 2010, to $10.8 trillion.

Some readers may be surprised to see me fulminating about budget deficits, since often I'm bouncing over ruts abroad trying to call attention to some forgotten crisis, like Darfur. But there is a common thread: These are issues that aren't sexy, that don't get television time and that most Americans tune out - yet demand action on our part for both moral and practical reasons.

America's fiscal mess may be even harder to write about engagingly than Darfur, because the victims of our fiscal recklessness aren't weeping widows whose children were heaved onto bonfires. But if you need to visualize the victims, think of your child's face, or your grandchild's.

President Bush has excoriated the "death tax," as he calls the estate tax. But his profligacy will leave every American child facing a "birth tax" of about $150,000.

That's right: every American child arrives owing that much, partly to babies in China and Japan. No wonder babies cry.