Nick Smith, May 18, 2003

The few years of surpluses between 1998 and 2001 - which weren’t really surpluses except by Washington standards - seem to have given us a false sense of security. Since then, the situation has deteriorated rapidly, and we face the most serious debt and overspending crisis in American history.

President Andrew Jackson paid off the federal debt in 1835, retiring the last of the Revolutionary War bonds. Within a couple years, however, the United States had returned to borrowing which has now grown to levels that President Jackson could hardly imagine. Starting at zero in 1835, it took more than a century for the debt to reach $100 billion in 1943. After two hundred years of American history the debt reached $500 billion in 1976. We’re now projected to borrow more than $500 billion this year and a similar amount next year. The debt stands at $6.5 trillion today and will reach $10 trillion at current borrowing rates before the end of the decade.

The debt isn’t even the worst of it. The government unfunded liabilities are several times larger than the official public debt. These liabilities are promises that the government has made or obligations it has undertaken without setting aside any resources to pay for them. According to the Treasury Department’s latest Financial Report of the United States Government, we owe, or can expect to owe $57.8 billion to cover defaults on direct and guaranteed loans, $55.8 billion in accounts payable across the government, $1.86 trillion for government and military pensions and benefits, $849 billion in other veterans benefits (mostly medical), $273 billion for environmental cleanup from government activities, and $202 billion in miscellaneous liabilities.

This still isn’t the biggest part of our unfunded liabilities, which are in Social Security and Medicare. It will cost $4.56 trillion to pay promised Social Security benefits over the next 75 years over and above expected tax collections. (The government uses it, but I’ve argued the 75-year number isn’t high enough. More honest are projections to run the program indefinitely, which are about twice as high.) Similarly, Medicare Part A is expected to run $5.13 trillion over expected taxes and Part B is another $8.13 trillion over. Thus, the 75-year liability in these two programs is more than twice as much as the entire public debt of the United States. Further, this unfunded liability assumes the full repayment of all trust funds. If those trust funds are not paid, those amounts, which are tiny by comparison, will have to be added to the liability.

We’ve gotten to this sorry state of affairs through overpromising by Washington politicians. Votes are bought today in exchange for benefits later. The problem is that the country can’t afford those benefits. About 13 percent of the total federal budget is now used to pay interest on the debt. If overspending continues and interest rates return to normal levels, we could easily be spending a quarter of the budget on the debt. A reckoning is coming. Sooner or later, if the government stays on its present course, we will face a choice of much higher taxes or much reduced benefits and services.

Washington needs a new sense of urgency. We’re promising too much, spending too much, and leaving future generations at risk. I’ve long pushed for spending restraint and necessary entitlement reform, including Social Security reform. It’s time for these issues to come to the fore.

Congressman Nick Smith represents the 7th District Congressional of Michigan in the U.S. House of Representatives.