At this midpoint in President Obama’s first 100 days in office, America is at a critical crossroads. The fact that the new president must strengthen the economy for today is a given. He also must strengthen it for tomorrow. These two goals are hardly mutually exclusive—they are in fact complementary.
Financially, the federal government is on shakier ground than many realize. Earlier this year, the U.S. Congressional Budget Office announced that it expects the government to face a budget deficit of $1.2 trillion, or 8.3 percent of our gross domestic product (GDP), for the fiscal year ending Sept. 30, 2009. This is a post-World War II record—and it doesn’t even include the cost of any economic stimulus or additional federal rescue efforts enacted into law after Obama took office.
Nor does it include funding to support additional war costs that will be required under any new strategy for Iraq and Afghanistan. Even without these anticipated costs, Treasury borrowing is expected to increase by almost 10 percent of GDP this year. In fact, we added more than $2 trillion to the national debt for 2008-2009 before the new president and Congress enacted a single piece of legislation.
The president and Congress are implementing a sizable stimulus package and taking further steps to address our housing crisis and troubled industries. The cost of these efforts, combined with declines in revenue due to the recession, will cause our federal deficit and debt levels to skyrocket further—a troubling but unavoidable development.
We hope that the stimulus package is timely, targeted and temporary; that it is large enough to make a difference but not excessively large; and that it is properly structured in order to minimize waste. We especially hope that it stimulates job growth—that it targets infrastructure and other appropriate investments to make the country more competitive.
President Obama and congressional leaders also should put a process in place to enable policymakers to make tough choices and strike a “grand bargain” with the American people. This should include statutory budget controls and comprehensive reforms to our Social Security, Medicare, health care and tax systems—all reforms that Washington has put off for far too long.
Social Security can be reformed to make it more solvent, sustainable and secure while better reflecting today’s economic realities and longer life spans. Medicare and our overall health care system can be reformed to stave off bankruptcy and more efficiently meet the basic needs of all Americans. Our tax code can be made fairer and simpler while still raising enough revenue to pay our current bills and deliver on promises the government intends to keep, including benefits for retirees.
In fairness, our policymakers don’t bear all the blame for the situation in which we find ourselves. After all, it is “we the people” who are responsible for what does and does not happen in Washington. Americans must reward rather than punish those who make tough choices and hold others accountable for their failure to act, if we want our future to be better than our past. This is our stewardship responsibility to our country and younger generations.
David M. Walker is president and CEO of the Peter G. Peterson Foundation and former U.S. comptroller general.