Standard and Poor’s cut the United States’ AAA-rating last year, and now the second shoe is about to drop.
Moody’s recently announced it would downgrade our AAA credit rating by the end of the year if President Obama can’t adopt a plan in conjunction with Congress to cut the U.S. debt-to-GDP ratio. That ratio now exceeds 100% and imposes a burden and risk on future generations.
In July 2008 candidate Obama declared the $4 trillion in debt racked up during Bush’s eight years “irresponsible” and “unpatriotic.” After getting elected, Obama publicly said in February 2009, “I’m pledging to cut the deficit we inherited by half by the end of my first term in office.”
Subsequently, Obama walked back and supported policies that drove four straight years of record deficits, averaging over $1.25 trillion a year — 63% higher than the worst single-year deficit of any previous administration. While GDP output has hardly budged and fewer Americans work today than at the beginning of the Obama administration, the national debt has grown by 51% — from $10.6 trillion to $16 trillion.
Out-of-control spending and debt, plus the declining creditworthiness of the U.S., are vital issues facing voters in November. This is the view of Mike Mullen, former chairman of the Joint Chiefs of Staff, a military man with a keen sense of history. “Our national debt,” he has said, “is our biggest national security threat.”
Historians have often compared the U.S. to the Roman Republic. In the first century B.C., Cicero warned: “The budget should be balanced, public debt should be reduced and the treasury should be rebuilt . . . lest Rome fall.”
A century later the “fiddling while Rome burns” Emperor Nero declared, “Let us tax and tax again … and see to it that no one retains wealth.” Within two generations many Roman cities became insolvent, prompting Emperor Hadrian to adopt bailouts through “centralized revenue sharing.”
Eventually, excessive spending and soaring debt forced Rome to inflate the national currency by replacing silver in coinage with base metals.
During the Roman Republic’s latter years, Claudius was elected tribune by bribing the electorate with promises of free grain at taxpayer expense. In the end, the collapse of Rome was due less to external invaders than to its own citizens becoming dependent and believing they could do better by voting themselves benefits than by working.
The relevance of the Rome narrative for today serves as a reminder for voter apprehension about contemporary politicians who advocate more government spending and power. Taxing the rich and taking from some to give to others has never solved deficits long-term. Moreover, it thwarts the private sector — the real source of national wealth — from growing and enlarging the tax base.
In fact, the ongoing jobs recession and poor economy are the direct result of Obama policies that have increased federal spending by 25% — from increased welfare and public assistance to massive expansion of regulations and bureaucratic meddling in the private sector that include government control of health care.
That’s why this election is critical. Romney and Ryan provide dramatically different leadership, and their message needs to be boldly taken to the public. Voters need to understand that a simplified tax code with lower tax rates and fewer deductions will invigorate private-sector growth — bringing in more revenue — and also reduce the corrupting influence of loopholes that disproportionately benefit the wealthy.
Second, people need to understand the basics required to save the viability of existing social security and health care entitlement programs.
Voters yearn to hear sensible and straightforward explanations, and the Romney-Ryan ticket offers proven policies for private-sector growth and job-creation and for an honest approach to save federal entitlement programs — an essential commitment to future generations and the essence of social security.
Powell is senior fellow at the Discovery Institute in Seattle.