U.S. Senator Chuck Hagel (R-Neb.) used sobering language to describe the country's fiscal situation during a speech he delivered in Omaha on Sept. 22. There is talk that he may run for president in 2008; I think his candor is necessary but he will have to frame his message in a more hopeful fashion to develop any kind of a nationwide following.
Sen. Hagel said runaway spending by Congress jeopardizes the future of the country. “Without economic power, we have nothing,” he said, stressing the importance of a sound national economy. He said the budget deficit for this year is running about $260 billion. Although that sum is lower than it was a year ago, and although many people are hailing the figure as a sign of fiscal restraint, Sen. Hagel said deficit spending is still dangerous. “This takes a toll on our currency, on our competitive ability,” Sen. Hagel said. “We are going to have to get control of our spending; when that happens it is going to get a little uncomfortable.”
Sen. Hagel said that politicians usually come home with news about all the money they have brought back to constituents. They then head back to Washington with promises about reigning in the budget. “We want to have it both ways,” Sen. Hagel said. With Congressional approval ratings coming in between 25 percent and 28 percent, Sen. Hagel commented that “the American people do not think we are doing a very good job. And they are right.”
Sen. Hagel said Congress needs to tackle the major entitlement programs if it hopes to make any progress on fiscal reform. “The entitlement issue alone hangs as heavy over this country as the threat of terrorism,” he said.
The second-term Senator cited a study by the Federal Reserve Bank of Cleveland which noted the country has $42 trillion in unfunded liabilities over the next 75 years related to Social Security, Medicare and Medicaid. He said in 2016-17, the Social Security Trust Fund will begin to pay out more money than it collects. The country currently spends $380 billion per year on Medicare and $190 billion per year on Medicaid. Three-quarters of the budget, he said, goes to pay these three entitlement programs, as well as other so-called “non-negotiables,” such as interest on the debt and pension obligations. Interest on the debt alone, he said, runs about $300 billion per year.
Even more troubling, he said, is our dependence upon foreign investors to finance that debt. “You know that $2 billion to $3 billion has to come in every day from off shore to cover our debt,” he explained. “We are at a record low for savings in this country, and individuals are at record high debt levels.
“If we do not get our house in order,” Sen. Hagel said, “if we don’t make some tough decisions one of these days, if we don’t prioritize our resources and where we want to go, then we are headed for a lot of trouble.”
tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.
Wednesday, October 11, 2006
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