This week on Facing the Future, former U.S. Senator Kent Conrad (D-ND), a past chairman of the Senate Budget Committee, discussed the serious challenges posed by the growing national debt, the looming insolvency of Social Security and Medicare, and the case for reinstating the Conrad Rule in the Senate to prevent reconciliation bills from increasing budget deficits.
Conrad emphasized the severity of the nation’s fiscal situation, noting that it is already having harmful economic effects. “Because our debt is going up so dramatically, from an already high level, that affects the value of the dollar,” he said. “Last year, the dollar went down compared to a basket of international currencies by 10 percent. Couple that with the inflation that occurred last year of about 4 percent. Those of you who think, gee, at least my investments went up 10 or 12 percent last year, well, your buying power actually went down. In part, it’s happening because of the massive debts we’re running up, which makes people less interested in holding dollars, having their investment held in dollar-denominated securities or dollar-denominated investments, American real estate, for example. So, this is sort of a hidden tax that’s occurring and reducing America’s wealth because we are running up these massive debts.”
He also noted that rising debt is driving up interest costs in the federal budget and limiting the government’s flexibility to respond to a crisis. Last year, interest was almost $1 trillion and cost more than all spending on national defense.
“As a former Budget Committee chair, one of the things you learn is that as interest piles up, it reduces your ability to do other things, whether it’s healthcare, or defense, or parks, or law enforcement,” Conrad said. “Your ability as a budget committee, as a Congress of the United States, to respond to the needs of the American people are reduced with increasing pressure as this debt builds.”
Moreover, he noted, “In case we face a calamity, like a war or a pandemic or some natural disaster, you always want a margin out there. You want to be able to have flexibility to deal with a possible crisis. That ability to be prepared for something unforeseen is being dramatically reduced by this pileup of debt. Most economists would say you don’t want to be above about 80 percent of debt to GDP, and we are now at least 100 percent. By some measures, when you include what we owe the [federal] trust funds, we’re well over 125 percent of debt to GDP.”
Conrad lamented the current political climate, where fiscal responsibility has been abandoned. He criticized both parties, and attributed some of the problem to removal of the “Conrad Rule,” a budgetary safeguard he put in place as Budget Committee Chairman.
The Conrad Rule was designed to prevent the use of the Senate’s reconciliation process to pass deficit-increasing legislation with a simple majority. “Reconciliation was designed for one purpose and one purpose only and that was to facilitate deficit reduction,” Conrad said. “In the Bush administration, they used reconciliation to pass the tax cut, which added to the deficit. When I first became Budget Committee Chairman, I was very concerned about that fast-track procedure that avoided the 60-vote hurdle being used to increase deficits when it was specifically designed to reduce deficits. So I put in place the Conrad Rule, which is a budget point of order that said any reconciliation package that increased the deficit in year 1, 5, or 10 would have a 60-vote point of order against it and would require 60 votes to pass.”
The Conrad Rule, “worked like a charm,” he said, because the rule “completely undid the use of reconciliation to try to avoid the 60-vote hurdle and just have a simple majority, 51 votes, to be able to pass legislation that increased deficits and debt. Unfortunately, when the Republicans came back in power, one of the first things they did was remove the Conrad Rule.”
The conversation included broader economic risks posed by the growing debt. Conrad warned of a possible vicious cycle, citing investor Ray Dalio’s concerns about spiraling debt effects: “America should not take lightly what can lead to a spiraling effect of too much debt and the pressure that puts on interest rates, and as a result of that, the reduction in overall economic activity and economic performance.”
Conrad noted the lack of serious debate about these issues in Congress. He called the current budget resolutions “an embarrassment” and “a joke,” criticizing them for failing to address the country’s long-term fiscal problems: “All it does is further explode the debt… It’s not a good joke, it’s a bad joke, and it’s an embarrassment, and anybody that votes for it should be embarrassed.”
Conrad called for a return to respectful, bipartisan collaboration, underscoring the importance of working together despite political differences: “Because somebody’s of the other party doesn’t mean they’re the enemy. People of good faith can get together and actually produce progress on the problems facing the country.”
Senator Conrad’s insights painted a sobering picture of America’s fiscal future. His strong calls for fiscal discipline, bipartisanship, and responsible budgeting underscored an urgent need for action. As he put it, “The longer you wait, the more draconian the solution has to be. That’s a mathematical certainty.”
