Yahoo Finance Unlike COVID, we know debt crisis is coming. How will we explain why we didn’t act? | Opinion
The past couple of decades have been a stark reminder that major problems can come out of nowhere and blindside us. These are the “unknown unknowns,” in the taxonomy of former Defense Secretary Donald Rumsfeld.
COVID-19 pandemic is an obvious example. No one anticipated a global pandemic would sweep the world in 2019 and 2020, killing more than 5 million people, disrupting supply chains, changing work patterns, requiring massive government relief programs, delaying educational development for children, eroding trust in government and institutions and causing immense stress in the commercial real estate business that has yet to work its way through the economy.
The 2008 financial crisis was another unknown unknown. The movie “The Big Short” highlights a few investment analysts who saw the patterns, and there were voices in the policy community, including my organization, the Institute for Policy Innovation, that warned government housing policy would eventually cause a crisis. But no one anticipated when and how it would manifest.
I have criticisms of how governments handled both of these unknown unknowns, especially the bank bailout created in 2008 and the closing of schools during the pandemic, but we should be able to at least understand that mistakes will be made in the fog of the unknown. What about the known knowns, though? What about the problems that everyone is aware of but that government refuses to address? How will future generations judge us for ignoring the known knowns that we face?
There is no lack of understanding about some major imminent problems. While Congress rushes to legislate on the hot issues of the moment, such as social media regulation, artificial intelligence and naming post offices, our elected officials actively avoid dealing with known disasters lurking around the corner.
We know, for instance, that our porous southern border is allowing people listed on the terrorist watch list to sneak into the country.
But when a group of senators made an attempt, however flawed, to begin to address the problem, they were ridiculed. Oklahoma Sen. James Lankford was actually censured by his own political party for stepping up to the plate and attempting to solve a problem.
Even more obvious, the United States is facing a fiscal crisis, and everyone knows it. Social Security will become insolvent in nine years, forcing a 23% cut in benefits if nothing else is done. Social Security and Medicare shortfalls are responsible for 97% of projected budget deficits over the next 30 years. Unless the nation reforms the programs, we face more than $100 trillion in budget deficits that will drive interest on the national debt to unserviceable levels.
Yet both Republicans and Democrats have not just refused to deal with this known known, they actively promise voters they won’t touch entitlements. And when you add interest on the debt, which cannot be avoided, about 75% of all federal spending is off the table for reform.
In other words, only 25% of federal spending remains to pay for the basic functions of the federal government. And it’s mathematically impossible to solve our fiscal crisis while refusing to even discuss changes to three-quarters of the budget.
Our Congress and presidents refuse to make the hard choices, establish priorities and deal with the known knowns. And future generations — the next generation — will judge them for it.
A government that was serious about dealing with the coming fiscal crisis would make hard choices. Here’s an example: In 2023, Congress appropriated more than $1.2 trillion for “infrastructure” improvements. Last week, the Francis Scott Key Bridge in Baltimore collapsed because of an unknown unknown, a collision by a ship. Everyone — literally everyone — assumes that a new, additional spending appropriation will pay for the reconstruction of the bridge.
But a government serious about dealing with our imminent fiscal crisis would conclude that some of that $1.2 trillion should be reallocated toward rebuilding the Key bridge, rather than spending additional funds above and beyond what’s already appropriated. Maybe some airport modernization or broadband subsidies are not as important as replacing a major bridge.
Not too long ago, responsible policy makers and opinion leaders were stepping up to the plate. Rep. Paul Ryan notably put forward a framework for entitlement reform, and his reward was to be run out of office. The way to succeed in politics, it seems, is to promise voters you’ll ignore the known knowns that are just around the corner.
The next generation — our children — will curse us for handing them this mess and refusing to deal with problems we can see are coming. And we won’t be able to claim ignorance.
Tom Giovanetti is president of the Institute for Policy Innovation , a free-market think tank in Dallas. Follow him on X: @tgiovanetti .
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