Moodys announced yesterday that it has placed the United States AAA credit rating under review for a downgrade due to the country’s failure to raise its debt limit. Standard & Poors had already placed the country on a negative outlook back in April; meaning that a reduction in rating would occur within the next 12-18 months if the debt ceiling were not raised. A downgrade in the US credit rating would dramatically increase interest rates, inflate the country’s debt and cause a negative economic tsunami that would be felt worldwide.
Party leaders met with the President once again in an attempt to reach a compromise. In what was described as a tense and fractious meeting, the President and Eric Cantor banged heads on the length of any deal. Cantor wants a short term stop gap deal to get past the election season. The President is entrenched in his belief that a long term 10 year deal is necessary to move the country forward. “This may bring down my presidency” the President said, “but I will not yield.” When Cantor interrupted the President for a third time, pushing the issue once again, the President pointedly said “don’t call my bluff. I’ll take this to the American people.” The President is said to have then abruptly left the room. Those in the room called the meeting the least productive thus far.
While all of this drama is titillating and fun for the media; there is a mammoth long term problem that is being missed.
The parties are arguing over a deal that will not put a dent into our financial obligations. The President likes to talk about a ‘Grand Bargain” that would cut $3 trillion from spending, increase revenue by $1 trillion and cut the deficit by $4 trillion dollars over the next ten years. The Republicans want a much smaller deal focusing on $2 million in spending cuts and zero increases in revenue.
Here is what seems to be missing from the debate. Here is the elephant in the room that everyone wants to ignore.
Our current deficit stands at $14 trillion dollars give or take a couple of billion. But that does not include Social Security and Medicare checks that have to be cut over the next ten years. Over the next decade we have unfunded Social Security obligations of $6 trillion dollars and unfunded Medicare obligations of $35 trillion dollars. When added to the current debt we owe $54 trillion dollars in the next decade. $54 trillion dollars!
Even if the President gets his $4 trillion Grand Bargain we will still have $50 trillion in unfunded obligations… and no plan to pay them. To put it in perspective; each American would have to work for four years… FOR FREE…to pay off this debt.
There is no way to fix this long term problem without overhauling entitlements, cutting defense and raising taxes. Anything else is whistling past the graveyard. Those in the room know it. They just lack the political courage to deal with it.
Over the past several months we have watched Washington squabble like school children over a $4 trillion plan that doesn’t begin address the financial difficulties that lie ahead. How will they ever right the country’s mammoth long term problems if they cannot agree on something this insignificant? The answer is they won’t; because all they care about is the next election.
We have said it before and we’ll say it again. These are not serious people. They place party, politics and re-election over the good of the country. Washington is broken and completely out of touch with the American people.