Urban Institute Panelists Examine Exploding Debt
The Urban Institute hosted an event today on The Financial and Economic Consequences of an Exploding Debt. Len Burman, Norman Ornstein, Mike Mussa, and Rudolph Penner all spoke.
In analyzing the U.S. budget, the panelists generally agreed that future interest payments on the debt will be one of the main drivers of the deficit and debt. As long as interest rates stay low it is relatively easy to add to the deficit, but several of the panelists questioned how long U.S. creditors will accept current interest rates as the GDP to debt ratio continues to climb.
The CBO’s projections, which assume constant interest rates and economic growth, show entitlement and interest payments consuming nearly 20 percent of GDP by 2030. Mike Mussa estimated that action needs to be taken within the next five to ten years, if not sooner. In the meantime, the panelists foresee a gradual erosion of the standard of living in the U.S.
In order for politicians to grapple with the long-term budgeting challenges in this time of political polarization, permanent campaigns, and new media, Norman Ornstein argued there must be broad bipartisan consensus. The public needs to demand action from their elected representatives. Even though he does not like the idea of working outside of Congress, Ornstein said an independent bipartisan commission that makes a recommendation that Congress can either accept or reject might offer the best hope given the intense ideological polarization.
The other panelists agreed that the public must call for reform. Len Burman said that it is important to make abstract budget problems concrete and communicate this message to the young people who will face slow growth and higher taxes if Congress does not act.