Hard as it may be to believe, it was only 18 months ago that House Speaker Nancy Pelosi accused President George W. Bush of having "mortgaged our future" because the federal budget deficit had reached $490 billion. That seems sort of quaint now.
President Barack Obama unveiled a proposed budget this week that would spend $1.267 trillion more in 2011 than what the government collects through taxes. His forecasts project deficits that top $1 trillion a year through at least 2020.
We understand that much has changed since July 2008. The near total collapse of the banking industry required an infusion of government money. Unpopular as this was, it did help the nation avoid economic disaster. Since then, however, the Obama administration and a Congress whose House still is led by Pelosi launched a stimulus plan that adds greatly to the deficit without offering any meaningful benefit to the economy, and those same people were narrowly thwarted in their plans to enact an expensive health care reform program that would have added more to this overspending problem.
With the economy appearing to have settled down to a mediocre hum, why is it the federal government can't settle back to its previous level of overspending? Why has "trillion" suddenly become the new "billion"?
By the way, Pelosi was right all those months ago; disingenuous, perhaps, but right. Large deficits do mortgage the future. They really do matter.
The worst that can happen is that investors, most notably the Chinese government, could begin to believe the United States lacks the means to pay off its debts. When individuals borrow so much they no longer can obtain credit, they file for bankruptcy. When nations reach that stage, the consequences are far worse. Currencies are inflated, living standards decline, wages fall and the nation no longer can protect itself or its people as it should.
The least that will happen is that the nation will have to divert so much of its resources toward paying interest on its debt that it can't fund things that really matter. Future generations will end up making interest payments on things the government does today, which is what Pelosi meant when she spoke of mortgaging the future.
Obama spoke eloquently last week about the need to become fiscally responsible. So far, we haven't seen any actions to back up those words. His plan to freeze budgets in all but national security, Medicaid, Medicare and Social Security was a joke. As the nation begins to regain its financial legs, lawmakers and the president must finally confront the need to cut entitlements and enact reforms that will move the federal budget in the right direction.