This Op-Ed was published by National Review Online and can be viewed here.
The latest U.S. national-debt figures are truly mind-boggling: According to the Treasury Department, for the twelve-month period ending Dec. 31, 2009, the federal government ran a deficit of $1.472 trillion, which is 116 percent greater than the deficit for the twelve-month period that ended December 31, 2008.
Since the first “stimulus” bill passed a year ago, some of us in Congress have been arguing that massive new federal spending as a strategy to spur economic recovery is sheer lunacy — the fiscal equivalent of trying to put out a fire in your house by dousing it with gasoline. Now a new study by economists Carmen Reinhart and Kenneth Rogoff provides confirmation of our worst fears about the economic policies of this administration: The explosion in government debt puts at grave risk any potential economic growth in the U.S. for years to come.
According to “Growth in a Time of Debt,” which was recently presented at the American Economic Association, “the sharp run up in public sector debt will likely prove one of the most enduring legacies of the 2007–2009 financial crisis in the United States and elsewhere.” The wide-ranging study looked at the debt levels of 44 countries and included data from the last 200 years in order to get a comprehensive picture of the effect of debt on economic growth. The conclusion was clear: Very high government debt — classified as 90 percent or more of gross domestic product (GDP) — resulted in average growth rates a full 4 percent below those of countries with lower debt levels. Since annual growth in U.S. GDP has averaged considerably less than 4 percent over the past ten years, carrying a high national debt could mean the difference between a growing economy and a contracting economy.
After the recent binge of federal spending, our nation’s gross debt is scheduled to surpass 90 percent of GDP this year, and to approach 100 percent of GDP by the end of the decade. And this does not even include Democratic plans to establish a massive new health-care entitlement and impose costly new energy mandates on business. If all of these agenda items are accomplished, it is a safe bet that the national debt will surpass 100 percent of GDP within the next decade.
Is this really the path we want to set for ourselves as a nation? As it stands, we are dangerously dependent on China for the financing of our debt. If the Chinese government determines that America is no longer the sound investment that it once was, it will cease to provide this service that we have come to rely on so heavily. Who, then, will support our enormous deficit spending year after year?
The foolish notion of spending our way to prosperity is the polar opposite of the tradition of hard work, thrift, saving, and living within our means that made the United States an economic powerhouse and an example to the rest of the world. Our current economic crisis is hardly the time to enact huge new entitlements and “stimulate” the economy with colossal new federal spending. In fact, the results of the past year have shown just how ineffective such an approach has been, with unemployment above 10 percent and little indication that the massive stimulus bill has affected job creation in the least.
What would stimulate the economy, as the study quoted above clearly indicates, is getting our fiscal house in order. One idea that I have long championed is a Commission on Accountability and Review of Federal Agencies. This proposal looks exclusively at controlling federal spending and debt by providing a path to realign or eliminate federal programs that are wasteful, inefficient, duplicated, failed, and outdated. It is a process that has worked before and can work again.
In the meantime, let us not be deceived by those who tell us that we can dig our way out of this fiscal hole by piling on more debt. The only thing that approach will stimulate is the inexorable growth of government.