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Geithner: Downgrade of U.S. government debt is out of the question. AP View Enlarged Image
Fiscal Recklessness: Worried about surging U.S. debt? Don't be. Some of Washington's top officials say it's all under control. Of course, the Titanic's owners ensured its passengers that it was the safest ship ever built.
Speaking to ABC News over the weekend, Treasury Secretary Tim Geithner pooh-poohed the very notion that U.S. debt could be downgraded from its current good-as-gold AAA rating, a move that would trigger higher interest rates, a jump in inflation and billions of dollars of capital flowing overseas.
"Absolutely not," Geithner responded, when asked if the U.S. could lose its triple-A . "That will never happen to this country."
We hope he's right. Because if he's not, it would be a financial disaster of unparalleled proportions, ending America's more than 100-year reign as the world's top economy.
Echoing Geithner's comments, Senate Budget Committee Chairman Kent Conrad, D-N.D., said "we can handle" the current debt of $12.4 trillion, or $9 trillion if you subtract the money we owe to Social Security, Medicare and other government programs.
Of course, Conrad's no fool. Even he knows this can't continue.
"If we stay on the course we're on," Conrad continued, the debt is "completely and totally unsustainable — the debt will approach 400% of the gross domestic product of the United States."
Still, hearing two top officials who have presided over the greatest expansion of debt in U.S. history talk about fiscal responsibility is a bit unsettling.
For many, all this abstract talk about debt has taken on an unreal quality. Be assured, it's very real. Those little pieces of paper are a form of fiscal bondage for our kids and grandkids. Today, we owe $12.4 trillion — or $40,260 for every man, woman and child in our country, and that's expected to nearly double over the next 10 years.
All of that debt will weigh heavily on the economy. When the government borrows so much, it can shoulder private businesses and entrepreneurs out of the market. No surprise, then, that the economy grows more slowly, businesses create fewer jobs, workers get fewer raises, and our standard of living gets squeezed in a vise of our own making.
As Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard noted in a recent global study, having too much debt carries a stiff growth penalty. "Above (debt ratios of) 90%, median (GDP) growth rates fall by 1%, and average growth falls considerably more," they say.
Well, guess what? On a gross debt basis, we hit 98% of GDP this year. So we don't have to wait for the debt Armageddon. It's here.
It's time to end this intergenerational child abuse.
Over the next 10 years, we'll run up deficits of nearly $11 trillion, adding further to our debt, according to the Office of Management and Budget. Long-term, according to a 2008 government report, we're $65 trillion in the hole — more than the entire world's output.
True, we have lots of assets. But the debt hole we've dug is growing too fast and can't be filled with higher taxes and more spending.
If we don't reverse course, and soon, the recent prediction by Moody's of a U.S. debt downgrade won't seem impossible at all, as Geithner suggests. It will seem prophetic.
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Posted By: dwdrury(620) on 2/8/2010 | 10:26 PM ET
What's amazing is that anyone believes anything that comes out of that little weasel's mouth. The only other living individuals for the World's Biggest Liar award are John Edwards and BO Plenty himself.
Posted By: MrPeabody(50) on 2/8/2010 | 8:31 PM ET
Get Tiny Tim a copy of Torbotax and Bugeting For Dummies
Posted By: Brownknows(1440) on 2/8/2010 | 7:51 PM ET
Winston Churchill said; "a country trying to tax (& spend) its way to prosperity is like a man standing inside a bucket trying to lift himself up by the handle." Time to stop cradle to grave entitlements or we risk placing our children in a debtors cemetery. No entitlement, or safety net unless you are at the poverty level or below. Immediately reduce entitlements to those levels & freeze them there. Cut taxes so money stays in private sector creating jobs, so fewer are at poverty level.
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