Newsfront The Great Superpower? Can America Remain


With the debt ceiling done, problems remain: a credit rating downgrade looms, strangling entitlements press on, and a weaker dollar threaten our economic future.


By David A. Patten W


HEN SEN. LINDSEY GRAHAM, R-S.C., announced that Congress and President Barack Obama had struck a deal to raise the debt ceiling, he described it in classic good news/bad news terms.


The good news, he said, was the United States no longer would be running toward bankruptcy. The bad news: “Instead of our nation running toward bankruptcy, we will be walk- ing toward bankruptcy,“ he said. Indeed, it’s hard to remember a bipartisan breakthrough that evoked more angst and less cheer. According to a recent Congres- sional Budget Offi ce (CBO) analysis of the deal, assuming the debt-ceil- ing bargain actually reduces future defi cits by the promised $2.5 trillion, the national debt would be about


BUDGET BUSTERS


President Barack Obama may be “the most spendthrift president in history,” according to The Wall Street Journal. OMB data at right show why: Federal spending under Obama, as a percent of GDP, has skyrocketed to its highest level in over 50 years. The primary causes: Medicare, Medicaid, Social Security, welfare, and food stamps. Entitlements accounted for 28 percent of federal outlays in 1965, but now gobble up 66 percent.


And that’s pre-Obamacare. SOURCE: Office of Management and Budget


10 NEWSMAX / SEPTEMBER 2011


$19 trillion by 2022. That’s reduced from $21 trillion, but no cause to crack open the bubbly. “Well, it is a baby step, and of course it’s not very reliable because there are so many promises of things yet to come,” said FreedomWorks Chairman and former House Majority Leader Dick Armey on CNBC.


Sen. Jeff Sessions, R-Ala., also was ambivalent: “The one fact every American must know is that the level of cuts in this proposal are only a fi rst step. Far more work and much greater reductions in spending are required to balance the budget.” Perhaps the best thing to come out of the debt-ceiling donnybrook: It focused public attention on just how bad the debt situation really is. A downgrade by a ratings agency could increase U.S. debt costs by $100 billion a year, and consumers’


Obama’s Blowout: Growth of federal spending as a percentage of GDP since 1960


26% 25 24 23 22 21 20 19 18 17


President Obama took Offi ce


70% 65 60 55 50 45 40 35 30 25


1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010


interest costs could rise by perhaps half of one per- cent. Nobody thinks those changes would be cata- strophic (although Obama may have to work overtime fi guring out how to shift blame to fi scal conserva- tives and former President George W. Bush).


“A credit downgrade means, roughly, that the U.S. will face higher borrowing costs,” Harvard libertarian economist Jeffrey Miron tells Newsmax, “and interest rates throughout the economy will tend to rise. The magnitude may not be large; the stock market has probably priced a lot of this in already.” Carnegie Mellon economist Allan Meltzer, a former member of the president’s Council of Economic Advisers, agrees. But he says the


On the Dole: Share of entitlements as percentage of federal outlays, 1965-2010


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