Is the American body politic permanently paralyzed? Indiana's Evan Bayh, resigning from the U.S. Senate in disgust, correctly identified most of the symptoms. There is gridlock in Congress, and it is most troubling in the Senate. The senior figures there are supposed to be able to take advantage of their six-year terms and develop a long view of the national interest—not like the weather vane of the House of Representatives, whose members face election every two years. Then there's the unproductive partisanship from the wing nuts on both sides of the political spectrum whose venom spews continuously in the news media, especially cable news, talk radio, and the blogosphere. They would be mildly entertaining were it not that America is in the grip of a severe financial crisis.
The only gleam of hope in this dark scene is that Democrats and Republicans have agreed to take part in a bipartisan commission to tackle the deficit. Established by President Obama's executive order (weeks after its rejection on a Senate vote), the commission has no executive power, but it does have two good men as cochairs—Wyoming's Alan Simpson, a former Senate leader, and Erskine Bowles, a centrist Democrat from North Carolina.
The chasm the commission is invited to bridge is wide and deep. One side wishes to slash taxes and shrink public services, following its belief that government programs are wasteful, bloated, and inefficient. The other side just as strongly believes it is necessary to increase public spending on social and economic needs, apparently heedless of the fiscal condition of the country.
Meanwhile, we are lurching toward a financial crisis that is well understood by the public. In a recent poll, 93 percent of respondents said they are concerned by the growing deficits; 59 percent are "extremely" concerned. The public has come to understand what excessive debt means on a personal level, given how many people have mortgages that exceed the value of their homes and credit card lines that are beyond their capacity to repay, particularly if their income goes down. People also have come to understand how enduring personal debt can be and what it means for their economic future.
Meanwhile, the country's debt has reached record highs for peacetime. This fiscal year, the federal deficit is expected to top $1.6 trillion, an astounding 10.7 percent of gross domestic product (this is double the 5 percent incurred during Franklin Roosevelt's New Deal from 1933 to 1936). The deficits through 2015 alone are projected cumulatively to exceed $6 trillion. And, in contrast to the 1930s, today's deficit is not going to be financed by Americans; about half of it is financed abroad, mostly by China and Japan.
Just think, our tax revenues are adequate to cover just four budget items: military spending, health spending, Social Security, and interest on the national debt. Every other program has to be covered with borrowed funds. This includes unemployment compensation, homeland security, support for state and local governments, federal outlays for higher education, satellite and manned space missions, the National Science Foundation, low-cost housing, infrastructure expenditures, the cost of our judicial and penal systems—the list goes on and on.
Let us also not forget that we still will have to cope with large increases in entitlement spending as our population ages and healthcare costs mount. So the long-term fiscal crisis will be even more severe. The administration's own projections reveal large, persistent deficits even after the economy has returned to full employment. Our cumulative national debt is estimated to climb as high as 140 percent of GDP by 2030, up from 50 percent just a few years ago. If we fail to act in response to these deficits, we face the dangers of a collapsed dollar; of foreigners who may stop buying treasury bills; of soaring interest rates that will constrain our economy and require 7 percent of our entire economic output to be paid as interest to debt holders; and of a decline in public services.