America at Fiscal Crossroads
Month after month, Americans continue to be pummeled with bad economic news. The dismal employment reports and sobering economic outlooks released in the past few days maintain the unfortunate trend.
The May jobs report from the Department of Labor marks 40 straight months of unemployment above 8 percent. The real unemployment rate is actually 14.8 percent when those those who can't find full-time work or have given up looking for a job are factored in, making for a labor participation rate near a 32-year low. That statistic represents more than 23 million Americans who are struggling in a stagnant economy.
Other economic indicators are equally discouraging. The number of new business start-ups is as a 17-year low, while the number of Americans on food stamps is at an all-time high.
The bad employment news was followed a few days later by an updated economic outlook report from the non-partisan Congressional Budget Office (CBO). As usual, the CBO analysis paints a grim picture of every aspect of our economy.
According to the latest CBO projections, government spending as a share of the economy will increase by almost 53 percent by 2037. Once again, CBO makes clear that the spending growth is driven by mandatory spending on entitlement programs. By 2025, spending on entitlements plus interest on the national debt will consume 100 percent of revenues. Contrary to White House claims that Obamacare will save money, the report indicates that mandatory health care expenditures will increase by 93 percent over the next 25 years.
Tax increases are definitely not the solution. The CBO report warns that even if “additional tax revenues were generated by boosting marginal tax rates, those higher rates would discourage people from working and saving, further reducing output and income.”
The bottom line remains the same: Unless Congress and the White House enact serious debt reduction measures, the nation will continue to drift toward disaster. The CBO describes the consequences of "a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates.” Interest rate payments on the debt are already projected to consume 9.5 percent of the economy by 2037. When our creditors inevitably lose patience with the growing debt, increased interest rates can plunge our economy into catastrophe overnight.
President Obama's solution to the latest round of bad news was to call a press conference to demand that Republicans in Congress “explain to the American people” why we haven't passed his jobs plan. The answer is simple: House Republicans have already passed over 30 jobs bills. A more relevant question is why have the president and his majority in the Senate failed to act on the vast majority of the jobs bills, along with the numerous budget-balancing plans the House has approved?
If the Democratic Senate and White House had agreed to the responsible spending reforms House Republicans have been passing for months, the fiscal outlook could already be improving. Instead of steadily deteriorating projections, each new economic report could be cause for relief.
It's almost hard to imagine, but headlines announcing booming job growth, shrinking deficits, and financially stable health and retirement programs could be a reality. With some cooperation and political courage in Washington, we can change the economic trajectory from peril to prosperity.