|
What do you do when a giant, looming problem threatens the prosperity of the nation, and it's in nobody's interest -- nobody's -- to talk about it?
That question is front and center now, in the final, frantic weeks of the Presidential campaigns, because Americans need to know where Bush and Kerry stand on this problem. But we're not hearing anything specific or substantive from either one of them, and we're not likely to.
The problem is what we might call the megadebt -- not this year's or next year's federal budget deficits, thought they're bad news, nor even the total accumulated national debt, but rather the debt that's going to start piling up in a few years, when the baby boomers start retiring and suffering the maladies of age. When that begins, and America's largest generation starts demanding its Social Security, Medicare, and Medicaid, we'll be looking at numbers such as no nation has ever been forced to contemplate.
Those numbers come in many varieties, and I don't want this page to look like it came from a math textbook, so let's put it this way: If the government had to account for its future pension and health benefit liabilities in the same way America's companies do, it would have to record a charge of $60 trillion to $70 trillion on its books. To put that number in perspective, consider that economists and politicians of both parties are freaking out over a government deficit in this fiscal year approaching $500 billion, which is a half trillion dollars. Or think of this: The total output of the U.S. economy, the world's mightiest by far, is about $11 trillion a year. Or how about this: The total economic output of planet Earth is about $35 trillion a year.
So that's the problem. Now here's the real problem. In Washington, as everywhere, most issues get resolved because it's in someone's interest to resolve them. Taxes get raised, taxes get cut, budgets get approved, treaties get ratified -- someone always benefits, so some horsetrading gets done and things get accomplished. But in the matter of the megadebt, those who will benefit are unlikely to show their appreciation to the politicians who could do what needs doing.
That's because those who will benefit probably won't perceive themselves as benefiting at all. The baby boomers who will be receiving those massive dollars figure they're entitled to them. If, as seems likely, the Social Security retirement age has be to extended or Medicare benefits have to be restricted, the recipients will consider themselves to have been harmed rather than helped -- and never mind that the changes were necessary in order to keep the programs alive. As a result, no politician wants to go anywhere near solving these problems, even they all know the solutions will only get more difficult as each day passes.
Fortunately, assorted non-politicians of stature keep reminding us of what we don't want to hear. One of them is Robert Rubin, Treasury Secretary in the Clinton administration and recently a guest on the program. He's a partisan, advising John Kerry, but his insistence that we address the megadebt isn't part of serving the Kerry campaign -- since, remember, neither candidate really wants to talk about it. Rubin and Pete Peterson, who was Nixon's Commerce Secretary, keep pointing out that failing to deal with the megadebt will mean grave trouble not just for the government's finances, but for the economy and the markets.
How? As Washington is forced to borrow more, it must offer higher interest rates to attract the money. Lenders begin to fear the U.S. will expand its money supply in order to repay its debt, sparking inflation fears that push rates higher still. The dollar falls in value, making imports more expensive and pushing U.S. living standards down. Consumers foresee higher taxes (so Washington can meet debt payments) and become less confident. Lower consumer spending and higher taxes whack corporate profits, and the markets tank.
That's a nightmare scenario, but it isn't based on radical assumptions. On the contrary, Rubin and Peterson think we're headed in that direction right now. Both men have reached points in their lives -- at or past retirement age, more than comfortably rich -- when sounding the alarm does them no good personally. They've spent most of their careers in the world of finance, and they want the country to know what's happening. As I said, it's in nobody's interest to talk about this. Rubin and Peterson are doing it out of a sense of duty.
So where do we turn for hope? I wish I knew. On the whole America has come through its economic problems in good shape, and I've learned that it's generally a mistake to be a pessimist on the U.S. economy. But we have a long history of not facing problems until they become crises, and if that happens with the megadebt, it's going to be a megacrisis.
|
