What’s extreme in this debate is not our cuts but our complacency.
It’s time for politicians to tell the truth and talk in trillions, not billions. The $14.2 trillion question before us is whether discussion of our debt crisis is hyperbole and fear-mongering, or whether our debt truly is the “greatest national security threat facing our nation,” to quote Adm. Mike Mullen, chairman of the Joint Chiefs of Staff.
This question is critical because until there is a consensus in the country we will never have a consensus in Washington. There is no question that the American people are deeply concerned about spending and deficits. I’m concerned their representatives do not understand how close we are to a crisis. I’ve found great fault with my friend President Obama because this national conversation should be led from a presidential podium, not by political odd couples in the Senate. But in the absence of leadership from others in Congress or the administration, I will continue to work with any colleague from either side of the aisle who is honest about this country’s fiscal peril.
Congress and the White House are ignoring many blatant warning signs.
Just last month Pimco, the world’s largest bond mutual fund, sold all its holdings of U.S. Treasury bills, the financial tools that allow us to pay Social Security benefits and fund our military. Bill Gross, who runs Pimco, sent a clear signal to investors that he expects rates on our Treasury bills to go up and prices to go down.
Gross also expressed concern that the Federal Reserve, as part of its money-printing program, had bought 70 percent of all Treasury bills. When the government becomes the best customer of its own debt, that’s called a Ponzi scheme, and it is only a matter of time before interest rates skyrocket.
Any increase in interest rates when we are running massive deficits puts us in a deeper hole. In 2011, interest payments to service our debt are expected to reach $225 billion. If interest rates return to their historic average of 6 percent, interest payments will more than double, if not triple.
Even if rates stay reasonably low, the interest-payment trap is dreadful. By 2022, tax revenue will cover only the cost of Medicare, Social Security and interest payments on the national debt. Everything else, including our defense budget, will be paid for with borrowed money, including money borrowed from potential adversaries.