"If instead of 5.3 percent interest in 2021 we're paying 15.8 percent (like we did right after President Carter), our interest will be $2.7 trillion per year, and our annual deficit will be almost $3 trillion ... almost all on interest! Using President Obama's own estimates, the GDP in 2021 will be $24 trillion per year. So we'd be paying 11 percent of our GDP on interest."
It is in the face of the inevitably of the current path leading to eventual crisis, and the distinct possibility of the crisis hitting at any time (as Democrat Rubin, former Fed Chairman Alan Greenspan and many other distinguished experts have publicly warned) that Obama's terribly ill-advised speech last week may well be harshly judged by history.
Putting aside, for the moment, that the central policy the president prescribed for dealing with the deficit was trillions of new tax dollars to be raised, the speech may be judged an historic tragedy because 1) even if it passed and worked as planned, a reduction in predicted cumulative deficits of only $4 trillion over 12 years is grossly insufficient to deal with the magnitude of the deficit and debt, and 2) the openly partisan tone (his characterization of GOP Budget Committee Chairman Paul Ryan's policies as un-American -- while Ryan sat right in front of him as a presidential guest at the speech) has dangerously raised the level of political bile just at the moment that we desperately needed to lower it.
Even if there is only a one-in-three or a one-in-six chance of the bond crisis hitting before 2013, the down side risk of such a calamity is so immense that no responsible Washington political leader would take it. It is like playing Russian roulette with our future. Would anyone put a six-shooter with even one bullet in the chamber to his or her head? Of course not. Yet that is the where, so far, the Democratic Party leadership (and some elements of the GOP Senate) have placed themselves.
Even the Ryan plan, solid as it is, will probably be judged as not enough deficit reduction not soon enough.
The only proposal so far put forward that clearly deals with the danger is the Republican Study Committee's, led by Congressman Jim Jordan. Where Obama would reduce the deficit by $4 trillion (and never get to balance) and Ryan would reduce about $6 trillion (and get to balance in the late 2030's), the RSC/Jordan plan would reduce it by $9.1 trillion and get to balance by 2020.
If the Jordan plan, or something like it, is not enacted into law in the next year and a half and the crisis hits, its non-passage may become one of the great tragic "what ifs" of history.
As this column was going to print, Standard & Poor's announced it was downgrading the outlook for the United States Treasury bonds to negative, saying it believes there's a risk U.S. policymakers may not reach agreement on how to address the country's long-term fiscal pressures.
Blankley, who had been suffering from stomach cancer, died Saturday night at Sibley Memorial Hospital in Washington, his wife, Lynda Davis, said Sunday.
In his long career as a political operative and pundit, his most visible role was as a spokesman for and adviser to Gingrich from 1990 to 1997. Gingrich became House Speaker when Republicans took control of the U.S. House of Representatives following the 1994 midterm elections.