In today's Wall Street Journal, former CBO Director Douglas Holtz-Eakin sheds some light on, what he argues, is our number one economic concern – the growing federal deficits:
The planned deficits will have destructive consequences for both fairness and economic growth. They will force upon our children and grandchildren the bill for our overconsumption. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China.
At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president's recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.
Mr. Obama and his advisers say they understand these concerns, but the administration's policy choices are the equivalent of steering the economy toward an iceberg.
He goes on to explain how both "fiscally dishonest" health care reform plans do nothing to achieve their main goal of reducing health care costs as both bend the cost curve upward. On top of that, the plans will create two additional entitlement programs that will grow faster than the economy and revenues taken in by the government.
That spells economic disaster but unfortunately our Congressional leaders and this president don't seem to care.
