Federal Government Has ‘Grown Too Big, Promised Too Much, Subsidized Too Many,’ Warns Former GAO Boss

The United States is likely to face a debt crisis within the next five years unless Congress undertakes serious fiscal reforms, says a former comptroller general who is urging lawmakers to treat the budget and deficit with the seriousness it deserves.

“The federal government has grown too big, promised too much, subsidized too many, undercut states’ rights, and lost control of the budget,” David Walker, who led the Government Accountability Office from 1998 until 2008, told members of the House Budget Committee on Wednesday.

Unless Congress puts the country on a different fiscal course, Walker believes there is a 70 percent chance of a serious debt crisis before the end of the decade. That crisis would have “serious adverse economic security, national security, diplomatic, and domestic tranquility consequences,” he warned, adding that the middle class would “be affected the most on a relative basis” if standards of living are suddenly hit with a debt-induced shockwave.

This week’s hearing was intended to highlight bipartisan agreement on the seriousness of the federal government’s fiscal problems, said Rep. Jodey Arrington (R–Texas), the committee’s chairman.

“We’ve got major fiscal problems and a completely unsustainable fiscal trajectory. I haven’t heard anyone, Democrat or Republican, witness or member, that [sic] doesn’t accept that fact,” he said. “We won’t know when the dominoes fall on us in a sovereign debt crisis, it’s going to be difficult to put the pieces back together and maintain our global leadership.”

Those remarks echo warnings issued in recent years by governmental entities like the GAO and the Congressional Budget Office, as well as outside groups like the Penn Wharton Budget Model. Since 2015 the gross national debt has doubled, from $18 trillion to over $36 trillion. Debt held by the public, which most economists consider the more significant measure, sits at more than $28 trillion, or 99 percent of GDP. Deficits of nearly $2 trillion are expected for the foreseeable future.

Douglas Elmendorf, the economist and dean of the school of government at Harvard University, who was invited to speak at the hearing by Democrats, also stressed the need for immediate action.

“Although we are not in a crisis now, delaying action has significant costs,” Elmendorf said. “The accumulation of debt crowds out capital investment, which holds down wages and pushes up interest rates relative to what would happen otherwise. In addition, the accumulation of debt limits the government’s ability to borrow when truly needed to respond to problems in the future.”

While there is little disagreement about the seriousness of America’s fiscal problems, the committee hearing also inadvertently highlighted the immense difficulty of solving them.

During his testimony, Walker proposed what he called a “fiscal responsibility amendment” to the U.S. Constitution, which would bind Congress’ ability to borrow recklessly. This could take several different forms. Germany, for example, has a so-called “debt brake” rule—which it hasn’t followed in recent years—that says the government’s annual budget deficit cannot exceed 0.35 percent of gross domestic product (GDP). By contrast, the U.S. federal government ran a deficit of $1.8 trillion last year, which is about 6 percent of America’s current GDP of about $29.3 trillion.

Another example is on the books in Colorado, where the growth of government spending is limited by a formula that takes into account population growth and inflation.

Those are good models to follow, but imposing those restrictions via a constitutional amendment seems like a nearly impossible lift. Amendments must be passed by a two-thirds vote in both chambers of Congress and subsequently ratified by three-quarters of the states, and no amendment has successfully navigated the process since 1992.

Of course, lawmakers don’t need a constitutional constraint to prevent them from borrowing too much. They could simply pass a budget that doesn’t depend on trillions of dollars in annual borrowing.

Yes, yes, it’s okay to laugh. But that is the thing that must happen. New constitutional amendments or other mechanisms like debt commissions—a solution favored by Cato Institute budget expert Romina Boccia, who also testified at this week’s hearing—are fine ideas worth pursuing. Embedded in both those ideas, however, is the admission that our elected leaders are somehow unable to do their most fundamental jobs without artificial constraints.

And that may very well be true: Available evidence certainly points to that conclusion. But the biggest budgetary constraint of all is the one Walker (and plenty of others) believe is looming just over the horizon. Congress cannot ignore it any longer.

The post Federal Government Has ‘Grown Too Big, Promised Too Much, Subsidized Too Many,’ Warns Former GAO Boss appeared first on Reason.com.

READ MORE

Source: https://freedombunker.com/2024/12/13/federal-government-has-grown-too-big-promised-too-much-subsidized-too-many-warns-former-gao-boss/