The deficit and debt are rising as political issues. But what are we supposed to do about them? David Walker, author of "Comeback America," spoke Friday in Dallas to the National Center for Policy Analysis. The former U.S. comptroller general now heads the Peter G. Peterson Foundation, which has held town halls to educate Americans about these issues.
Walker presents grim statistics in his book, including that by 2030, Americans could face higher tax rates than Europe because of our debt. That's not far away. What should we do?
- According to Walker, we should separate the short-term deficit from the structural one.
- Our current deficit is caused by the recession, various bailouts, two wars, several tax cuts and recent increases in federal spending.
- It will remain high for a couple of years and may rise in order to stimulate the economy and create jobs.
The deficit we should worry about is our large and growing structural one, he says:
- We need a fiscal commission that recommends budget controls, reforms in Social Security, Medicare and Medicaid, our tax system and various other changes.
- But a presidential commission won't have as much power as a statutory once since Congress won't have to vote on its recommendations.
Americans shouldn't assume that this country is too big to fail, says Walker. But the Chinese need us to buy their exports. Will they really stop buying our debt?
"No. They won't buy as much, but they will demand a higher interest rate for what they do buy," explains Walker.
"Believe it or not, even if interest rates do not rise, within 12 years, the largest item in our budget will be interest on the debt. And I assure you, rates will go up after the economy rebounds. The question is, how high will they go?"
Source: William McKenzie, "Our Q&A with David Walker," Dallas Morning News, January 29, 2010.
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