This week on Facing the Future, former Indiana Governor Mitch Daniels gave us his take on the federal budget outlook and what needs to be done to put the nation on a sustainable fiscal path. Daniels’ extensive experience in the public and private sectors also includes serving as president of Purdue University and as Director of the Office of Management and Budget under President George W. Bush. Concord Coalition executive director Carolyn Bourdeaux joined the conversation.
Daniels warned that a fiscal crisis in the United States now seems inevitable. “I hate to concede this point,” he said. “For years and years, I argued that we could head off a very unfortunate and unfair situation if we began taking some reasonable steps. But we’ve procrastinated and delayed those steps. Presidents of both parties and Congresses led by both parties have either actively, or acquiescently, made it worse. So I’m afraid we’re going to have, as the cynics have always said, a crunch before our institutions will respond to it, and that doesn’t say very much for us, for our maturity as a self-governing people. The way we respond to that event, when it happens, whatever form it takes, will say a lot about whether we are still the kind of Americans we’ve always been.”
Despite the warning signs, Daniels said that a crisis could take many people by surprise. “I don’t think people have quite grasped how suddenly this could all occur,” he said. “The federal government is now selling its debt in unbelievable quantities and we all know they’re going to escalate, given the commitments that the country’s made particularly in the entitlement programs. If the day comes when they can’t sell that debt, the dollar collapses, commodity prices rise probably quickly, there’s a stock market crash, and a sell-off of American assets. We saw a little preview of this at the time that the president suggested massive tariff increases. That could be a miniature version of what we might face on a much larger scale.”
Daniels also warned about the “sense of social betrayal” that would come with “skyrocketing prices and suddenly people finding everything unaffordable.”
He believes that “the chances of a debt driven disaster are actually more probable than various natural disasters or business collapses that I’ve had to think about in the past,” and he strongly suggested that “people right now should be writing the game plan for very drastic things. There will not be good choices or any easy choices.”
If it comes to a crisis, Daniels said, “we’ll have to think about what major changes in the entitlement programs can be made that try to protect the most vulnerable people, although even there we probably would have to reduce support and subsidies.” He added that we would also have to consider “what tax or revenue increases are thinkable that won’t be counterproductive and won’t hurt the economy more than they shore it up.”
Fortunately, Daniels can also see a more optimistic scenario. “We could gather ourselves together as Americans and address this problem like grownups to head it off. Think of our children and the future more than we do ourselves. Recognize that all these incredible sums of money we’re borrowing are not being invested in the future. You could make a case if they were, but they’re being borrowed today and spent on ourselves, passing the bill on to others.”
“For all our divisions,” he continued, “this is something that affects every single one of us. If we don’t do something effective about this, or if we have to face that crisis that now looks all too likely, it will be a problem that crosses every line of partisanship and philosophy and geography and demography. So I’m still hopeful that we will find leadership for persuading lots of Americans that we can put aside our other differences. This is a threat to us all, and deserves everybody’s support.”
Hear more on Facing the Future. Concord Coalition Senior Advisor Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
