On a bitter winter night 40 years ago, a British trawler caught in a North Sea gale hundreds of miles from help was accumulating ice on its deck and rigging faster than the crew could chop it away. Soon water flooded the engine room, leaving the boat with only emergency power. In the hour before the vessel sank, a Royal Air Force radio operator made contact and asked: “What are your intentions?” The final transmission came slowly: “No intentions.”
Many seasoned observers are now beginning to worry that Congress is on the verge of a “no intentions” response to the threat of financial crisis from our growing indebtedness. In recent weeks, the Senate was unable to muster the votes needed — including those of many original supporters — to adopt the Conrad-Gregg proposal for a bipartisan commission to develop specific policy changes for deficit reduction. Other amendments intended to scale back the growing hole in the budget also failed to pass. Only a statutory pay-as-you-go proposal, laden with exceptions for expiring tax cuts and a free pass for payments to Medicare providers, won Senate approval.
At the same time, the public is growing increasingly concerned about the country's fiscal future. In the face of deeply troubling projections of federal debts, a clear majority in recent polls has rated deficit reduction a “major priority.” The Peterson-Pew Commission on Budget Reform and other groups have warned that the U.S. faces an increasing risk of debt-driven fiscal crisis that could trigger a double-dip Great Recession. The commission's December report also described the economic benefits of a federal commitment to stabilize the growth of the debt by 2018. Those benefits — a lower path for interest rates and a stronger dollar — could be captured without endangering the economic recovery, if the government could commit to stabilizing the debt and enact changes in policy now to become effective only as the economy strengthens.
The threat to the U.S. economy is not only that we will run up against a critical tipping point of debt to national income that will suddenly send us into economic decline. There is also a gnawing fear that the U.S. may have lost the political capacity to act in its own interest. To many Americans, the federal government appears increasingly dysfunctional.
The current lack of Congressional resolve and action is not due to a shortage of policy solutions that could correct the fiscal imbalance. To the contrary, many think tanks and public interest groups are busily turning out reasonable solution packages. Evidence of the willingness of our elected leaders to act now is the missing and desperately needed ingredient.
Make no mistake: The government of the United States faces a risk to its global credibility. Defusing that risk requires constructive action, and Congress should take a first step soon. A logical and important place to begin would be for Congress to express its common commitment to a bipartisan goal of reducing the debt over the medium term, as the economy strengthens.
For instance, the leadership could introduce and take up in short order a resolution that adopts medium-term fiscal targets and directs the Budget Committee to report a 2011 budget resolution consistent with that target.
A fiscal target could be designed in a number of ways. The Peterson-Pew Commission on Budget Reform recommended that Congress aim to bring federal debt down to 60 percent of gross domestic product over a multiyear period, a target that was endorsed by the National Academy of Sciences and National Academy of Public Administration. Others have suggested alternative targets that could also put the budget on a sustainable track.
We sail toward troubled waters as a result of a chosen course that ignored the dangers of an exploding federal debt. But even now, help is within reach. We need only find the will and the united resolve to make the first turn toward safe harbor.
Marvin Phaup is director of the Pew Charitable Trust's Federal Budget Reform Initiative.