Fiscal tsunami warning

News & Politics

Here's the bad news -- and it is bad indeed:

"We face a demographic tsunami" that "will never recede," (comptroller general of the United States) David Walker tells a group of reporters. ...
To hear Walker, the nation's top auditor, tell it, the United States can be likened to Rome before the fall of the empire. Its financial condition is "worse than advertised," he says. It has a "broken business model." It faces deficits in its budget, its balance of payments, its savings � and its leadership.
Walker's not the only one saying it. As Congress and the White House struggle to trim up to $50 billion from the federal budget over five years � just 3% of the $1.6 trillion in deficits projected for that period � budget experts say the nation soon could face its worst fiscal crisis since at least 1983, when Social Security bordered on bankruptcy.
Without major spending cuts, tax increases or both, the national debt will grow more than $3 trillion through 2010, to $11.2 trillion � nearly $38,000 for every man, woman and child. The interest alone would cost $561 billion in 2010, the same as the Pentagon. [LINK via Daily Kos]
Alll this red ink, combined with Bush's plummeting poll numbers, is creating a huge rift within congressional Republicans over just where to make those spending cuts:
Much of the debate that has split Republicans in Congress has been about money: How can the nation pay for hurricane relief, rein in federal spending to address mounting budget deficits, and renew major tax cuts at the same time?
In the Senate Finance Committee last week, Republicans were unable to pass an almost $70 billion tax cut plan when Sen. Olympia Snowe, a moderate Republican from Maine, balked at extending a tax break on capital gains and dividends -- which tends to favor wealthier investors -- at the same time Congress is cutting social programs that benefit mostly the poor.
In the House, Republican leaders are trying to cool the intraparty tensions between moderates and conservatives over a budget bill that would cut $51 billion in federal spending.
House Majority Leader Roy Blunt, R-Mo., postponed a vote on the bill Thursday after GOP moderates complained it would cut too deeply into programs such as Medicaid, Medicare, food stamps, college loans and foster care. Many conservatives had been pushing for even bigger cuts.
To secure enough votes for passage, Blunt reached a deal with moderates to drop provisions that would allow drilling in the Arctic National Wildlife Refuge in Alaska and in the outer continental shelf, and to soften a proposed cut in food stamps for legal immigrants. But the deal backfired when angry conservative House members said they no longer could support the package. [LINK]
It's clear that the House conservatives are suffering yet another bout of Gingrich-itis, i.e. extreme political hubris that disdains compromise in favor of ideology. We all know how that story ends.

If we get lucky, moderate Republicans and Democrats can stonewall any dramatic cuts until the midterm elections. Of course, none of this matters if the Democratic party isn't willing to propose a bold new economic vision that will not just put them back in power, but also save the nation from this latest disaster.

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