President Obama has gone campaigning. The Congress is on vacation. And the Republican presidential candidates are about to train their blows on each other in earnest as the GOP field narrows.
In the meantime, one of the greatest challenges in our country’s history goes unaddressed. Ordinary Americans are already wrung out by a series of unprecedented events: first, a manufactured crisis over raising the nation’s debt ceiling, then the first-ever downgrade of America’s credit rating, followed by one of the most turbulent weeks in stock market history.
Every person with even a few dollars to invest is holding their breath this week, hoping for some respite from the drumbeat of bad news. But we can’t afford to relax for a minute because the hard truth is that we are not a single step closer to solving America’s core economic problems.
Most importantly, there are 25 million unemployed or underemployed people in our country. Jobs are the urgent national priority. But there will be no meaningful job creation without economic growth – and most experts are now predicting that America can expect only 1 to 1.5 percent annual growth through 2013. President Obama should cancel his vacation and demand that Congress return to Washington to join him in forging a national jobs creation program. Work must start now, not in September and certainly not after the November 2012 presidential election.
As obvious as this is to most people in America, too many of the country’s politicians remain unreasonably fixated on debt and deficits. This is tragically misguided. Rampant fiscal austerity just as America teeters on the verge of another recession is destructive.
At $14.7 trillion the US debt is the largest in the world and it would be impossible for anyone, regardless of political persuasion, to argue that reducing it is not in the long-term national interest. But is America’s national debt at catastrophic levels given the size of the U.S. economy and given our status in the world? It is certainly not.
America’s ratio of debt to gross domestic product or GDP is now very close to 100 percent. But Japan’s national debt is 226 percent of GDP and the Japanese people are saving, investing and consuming quite well even in the face of the horrible natural disasters they’ve had to ensure this year.
Our great neighbor to the North, Canada, has a debt to GDP ratio of 84 percent, which is very close to our own but that country is calm and stable; and Germany, Europe’s powerhouse, is prosperous with a growing economy, even though it has a debt equal to 79 percent of its gross domestic product.
To capture the true absurdity of focusing too much on these fiscal barometers, look at the other end of the debt to GDP spectrum and you’ll find that the nation with the smallest percentage of debt in relation to its national economy is Libya — that’s right Libya! According to the International Monetary Fund, and based on 2010 figures before the revolt against the Gaddafi regime began, Libya’s debt equaled just 3 percent of its GDP.
Next in line are Equatorial Guinea, Oman, and Azerbaijan, each with debt to GDP of less than 5 percent. No sane person would suggest these countries are better off than America; nor would Americans want to emulate Russia, the only major world power with a debt to GDP ratio of 10 percent or less.
Our other national fixation is cutting government spending. The Tea Party and Republicans are right. We do spend too much. But the GOP played a big part in creating the daunting problems we now face: 1) starting two wars that still remain with us and that have cost more than $1 trillion; 2) creating a revenue drought by passing excessive income tax cuts that permit insanely wealthy people to pay proportionately little; and 3) failing, along with Democrats, to make the tough choices on and gain control of entitlement spending especially for health care.
The fiscal year 2011 U.S. budget has a projected deficit of $1.6 trillion, a staggering sum. Clearly, it must be reduced significantly. But we can’t cut our way to a better tomorrow. National defense, intelligence and other security programs are budgeted at $908 billion and there’s strong political resistance to reducing these expenditures. Mandated programs together dwarf even defense: Social Security costs $742 billion, Medicare $488 billion, Medicaid $276 billion, and interest on the national debt $207 billion. The budget for pretty much everything else the federal government does from education to environment to law enforcement has a combined budget of $507 billion.
If you wiped out most everything we’ve built up in American government over more than 200 years of history as a nation, you wouldn’t reduce the deficit by even a third. That’s why the political posturing over cuts in spending as the sole or primary solution is both absurd and maliciously counterproductive.
In order of importance, America needs jobs, economic growth, intelligent tax reform that brings in significant new revenue, an end to fighting wars we cannot win, and finally, focused across-the-board spending reductions.
Oh, and we need real and courageous leadership from our elected officials, a sense of civility, and a desire to embrace intelligent compromise. Some say our American political system is broken. Let’s prove the skeptics wrong while we still have time and let’s do it for those 25 million of our fellow citizens who go to bed each night without any or without adequate employment.
Mr. Balboni is Chief Executive Officer and Co-Founder of GlobalPost.