Lee Hamilton, director of the Center on Congress at Indiana University and veteran member of the U.S. House of Representatives for 34 years has big concerns about the US economy. His newspaper essay 52 Worries Inaction Could Lead to “A Fiscal Crisis of Historic Proportions” Hamilton voices his concerns about the rising percentage of federal spending to “about 20 percent of the nation’s GDP, the budget analysts note; if current trends continue, that will rise to fully 25 percent by 2040.”
The US economy’s GDP has long been dominated by consumer spending, which as of 2013 was 71% of GDP. Hamilton, currently a member of the U.S. Homeland Security Advisory Council, fears that growing federal spending is unsustainable and dangerous. His calculations show that while spending increases (amounting to only 19 percent of GDP) revenues aren’t growing quickly enough to offset the spending. The Congressional Budget Office issued a sobering report on the American economy’s long-term prospects and as Lee Hamilton warns: “We face a fiscal crisis of historic proportions.”
Increased federal spending and debt is the by-product of an economy just out of a serious recession, where the government stepped in with stimulus packages to keep the economy from crashing altogether. With time, the economy grows, offsetting the deficit. But there’s urgency to Hamilton’s essay, and with good reason. The US has an aging population requiring more social security benefits and health care than we’re prepared for, leading to a substantial deficit. We’re headed for a perfect storm and there’s no time to wait.
According to Hamilton, “Unless we can stabilize the debt and put the country on a path of sustainable economic growth with prosperity evenly shared, we’ll have no firm economic base for all the lofty goals being put forward by presidential hopefuls.”
Hamilton urges politicians to stop passing the buck and tackle the issues before it’s too late. His solutions include:
- Getting long-term debt under control
- Finding a solution to keep Social Security solvent
- Deal with mounting health care costs, which pose the same challenges as Social Security
- Invest in skills, education and infrastructure “without breaking the bank”
- Reform tax policy to be fair and transparent for long-term growth to be possible
Hamilton is quick to point out that the problem is not with the system itself. Historically, reforms to Social Security (1983), taxes and budget agreements kept the nation and its systems solvent and evolving with the times.
Hamilton finds that the problem today is the sharp ideological divide amongst our leaders. It’s time to find common ground and solve the debt problems with creative, multi-faceted solutions that address both revenue and spending cuts.
It’s going to be painful, but as Hamilton writes, “All issues will have to be on the table because the pain needs to be shared broadly.”
Hamilton urges Americans to get involved: “It’s up to the American people to demand action. We have to create the political will that drives our leaders to deal with these difficult economic problems — that leads them to tackle entitlements, health costs, investing in the future and tax reform.”
Will our leaders listen before it’s too late?