A new bipartisan report by former Treasury Secretary Robert Rubin, Brookings Institution Senior Fellow Peter Orszag, and CEO and Chief Global Economist of Decision Economics, Inc=, Allen Sinai, warns that the Bush Administration’s record deficits will have “severe adverse consequences” for all Americans. “The U.S. federal budget is on an unsustainable path,” they write, adding, “In the absence of significant policy changes, federal government deficits are expected to total around $5 trillion over the next decade.” What does this mean for hard-working American families and individuals?
When the Bush check comes due, younger generations can expect a weaker job market, fewer public services, and a declining standard of living. To put the deficits in perspective, five years from now the average family’s share of the national debt will be more than $84,000, compared to a projected $500 per family when Bush took office. The picture for America’s children is grim. Large, sustained deficits eventually suck up national savings, meaning less money for education and training of young people and workers and lower investment in other economic sectors. As deficits continue, huge chunks of taxpayer dollars will be diverted from education and health programs to service the national debt. Interest rates will rise and living standards will decline.
Big deficits today affect family budgets tomorrow. As the Rubin report shows, Bush Administration economic policies are sharply increasing the chance of financial chaos. “Taken to the extreme, such a path could result in an economic crisis. Foreign investors could stop investing in U.S. securities, the exchange value of the dollar could plunge, interest rates could climb, consumer prices could shoot up, or the economy could contract sharply,” according to a 2003 Congressional Budget Office report. Just last week, the IMF issued a strong warning about U.S. fiscal policies stating, “large U.S. fiscal deficits also pose significant risks for the rest of the world.”
We can change course – the President’s tax cuts for the very wealthiest must be repealed now. The Bush Administration believes spending cuts alone will cure its ballooning deficits but economists agree that’s wishful thinking. By repealing the tax cuts for the top 1 percent of earners, and letting other tax cuts expire, the U.S. can begin restoring fiscal discipline and begin preparing for the huge expenses of the coming Baby Boomer retirement.
Daily Talking Points is a product of the Center for American Progress, a non-partisan research and educational institute committed to progressive principles for a strong, just and free America.