Sheila C. Bair ranks quite high amongst ‘Very Serious People’, to use Paul Krugman’s phrase. In today’s Washington Post, the Chair of the Federal Deposit Insurance Corporation (FDIC) very seriously argues:
The quiet confidence of the American public in the FDIC’s deposit insurance guarantee was one of the bulwarks that helped to stem the tide in the recent crisis and avert even greater economic calamity. But we must never take public or investor confidence for granted. In the end, that confidence is only as great as the resolve shown by our government in identifying emerging risks and taking concerted action to head them off. Excessive government borrowing poses a clear danger to our long-term financial stability. All of us must work together now as Americans, look beyond our narrow partisan interests and show the world that we are prepared to act boldly to secure our economic future.
So what does Ms. Bair mark for bold, collective non-partisan problem solving?
Total federal debt has doubled in the past seven years, to almost $14 trillion. That’s more than $100,000 for every American household. This explosive growth in federal borrowing is a result of not just the financial crisis but also government unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit.
Retiring baby boomers, who will live longer on average than any previous generation, will have a major impact on government spending. This year, the combined expenditures on Social Security, Medicare and Medicaid are projected to account for 45 percent of primary federal spending, up from 27 percent in 1975. The Congressional Budget Office projects that annual entitlement spending could triple in real terms by 2035, to $4.5 trillion in today’s dollars. Defense spending is similarly unsustainable, and our tax code is riddled with special-interest provisions that have little to do with our broader economic prosperity. Overly generous tax subsidies for housing and health care have contributed to rising costs and misallocation of resources.
‘Government unwillingness … to make the hard choices’, eh? What is ‘primary federal spending’ as opposed to secondary or tertiary?
And, ‘Defense spending is similarly unsustainable….’ Ms. Bair doesn’t grace us with comparative figures for her last three, throw away targets, because, of course, they are not part of the social safety net slated for extinction.
Let’s hear Very Serious People talk about the choice, just for one, of educating, training and employing Americans to compete economically versus continuing one or all of America’s four hot wars: in Afghanistan and Iraq, on Drugs and on Terror.
The ‘hard choices’ Ms. Bair and her comrades want made have nothing to do with the real choices we confront. In fact if, perhaps, not intent, their ‘choices’ divert attention from the real ones. For instance, take the numbers Ms. Bair gives us. How do the costs of the War on Drugs — from incarceration to intelligence — compare since 1975 with today’s safety net costs? Since there is no sign that this 37-year war will be any closer to success after 62 years, how much of the budget will it account for 2035?
That is the type of hard choice about the future the US and the West are making without in any way acknowledging it.
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