By State Treasurer Ken Miller
While recent reports show state economic prospects heating up, no recovery is guaranteed. Oklahoma is not immune from macroeconomic conditions or bad decisions made in our nation’s capitol. Unfortunately, the current Washington stalemate threatens our economic recovery just as it’s catching fire.
With the federal government borrowing 40-cents of every dollar spent, much focus is on the US debt crisis. In the last 10 years alone, the gross federal debt has ballooned about 150 percent from $5.8 trillion to $14.3 trillion. This is an increase from 56 percent of GDP in 2001 to more than 100 percent today. The cause is simple – it’s the spending, stupid!
Nearly 200 years ago, political observer Alex de Tocqueville wrote, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.” Studies show most voters negatively view spending in the aggregate, but positively view spending on favored programs that comprise about 90 percent of the federal budget.
Some of our recent deficits are attributable to prolonged war and deep recession. But much of the debt is the consequence of politicians who can’t refuse special interests that demand more government than we can afford, and it’s a bipartisan affair.
The debt ceiling was raised seven times under the most recent Republican president and debt grew under the last four. The current Democratic president accelerated the debt by more than $1 trillion each year. Congress under both parties has spent freely.
The consequences of continued irresponsibility would be devastating. The global economy is built on the full faith and credit of the United States. If that faith were damaged by default or austerity, Oklahoma would suffer from negative effects on the dollar, interest rates, investment, consumption and jobs. Billions of federal tax dollars returned to Oklahoma for core functions would be in doubt and $4 billion of state investment in federal securities could be at risk.
The President and Congress have left the country the choice between bad and worse: going further in debt or default. Now, they must finally take action with a credible long-term deficit reduction plan that takes into account fragile aggregate demand and the peril of defaulting on U.S. debt.
Once our national leaders avert the immediate crisis, they must commit to strict constitutional spending constraints that include a cap and balanced budget requirement. If policymakers would just return to our post-depression debt average near 60 percent of GDP, our $14 trillion economy would have to grow $10 trillion to reach the debt ceiling.
Though Tocqueville warned representative democracy lends itself to overspending, he also said, “the greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her own faults.”
America is best equipped to tackle her faults when we work together to correct them. Our country is facing a defining moment that requires statesmen to work in a bipartisan manner so American exceptionalism survives to benefit the next generation.