The federal budget deficit has already hit a trillion dollars just in the first nine months of this fiscal year, and is on pace to break the $1.3 trillion mark set in all of the last fiscal year. Observers predict that by the end of this fiscal year, we'll hit $1.5 trillion in debt. Here's something scary: When I went to double-check those numbers with a few news sources on Google, among the top publications listed that had written about it were not the Wall Street Journal or Bloomberg, but the People's Daily in China.
Take a look at the official newspaper of the Communist Party in China, in this morning's online edition under the headline "U.S. federal deficit tops one trillion dollars." The story ends with:
The ballooning deficit problem has drawn wide concerns under the circumstance of a sovereign debt crisis in Europe. Earlier this month the International Monetary Fund (IMF) urged the United States to rein in its soaring budget deficit. 'The central challenge is to develop a credible fiscal strategy to ensure that public debt is put--and is seen to be put--on a sustainable path without putting the recovery in jeopardy,' the IMF said in a report.
These aren't fiscal conservatives or Tea Partyers saying spending is out of control--even the Chinese communists are saying we've got to rein in government spending. (If you spend some time looking at the People's Daily website, you'll see this isn't the first time they've written about our debt.)
Last weekend, debt commission co chairs Erskine Bowles and Alan Simpson spoke to the National Governors Association annual meeting. The Washington Post covered their presentation, which mentioned both the Chinese and the British:
The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. ‘The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans--the whole rest of the discretionary budget is being financed by China and other countries,’ Simpson said.
‘We can't grow our way out of this,’ Bowles said. ‘We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out … The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that.’
Bowles pointed to steps taken recently by the new coalition government in Britain, which also faces an acute budgetary problem, as a guide to what the commission might use in its recommendations. That would mean about three-quarters of the deficit reduction would be accomplished through spending cuts, and the remainder with additional revenue.
Bowles is absolutely right about following David Cameron's "80-20" rule of spending cuts to tax increases. [See 5 debt management tips Obama can take from the British.]
Simpson and Bowles called the rising tide of debt a cancer "that will destroy the country from within." Maybe that's why the Chinese are paying such close attention.
- See how Obama can learn from the British on debt management.
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