The bailout parade is continuing unabated in Washington this week. On the heels of a $25 billion bailout for the automotive industry, the Bush Administration agreed yesterday to a $4.3 billion bailout of Massachusetts’ out of control health care spending. Apparently when numbers like $700 billion are being thrown around, numbers like $25 billion and $4 billion begin to sound like chump change. These “crises” all share one thing in common: they all could have been avoided if our politicians made relatively small but unpopular decisions today to avert disaster in the future. This failure is all too common among our current crop of leaders and it is sending our nation straight into a crisis 60 times larger than the proposed Wall Street bailout.
Imagine a taxpayer bailout even larger than what’s proposed for Wall Street. Now imagine it recurring every year in perpetuity. That’s our fiscal future unless we fundamentally reform Medicare and Social Security. Combined, these programs expose taxpayers to $41 trillion worth of unfunded obligations over the next 75 years. According to the Congressional Budget Office, absent fundamental reform of these entitlement programs we will have to either: A) double all tax rates; B) eliminate every other federal program, including defense and education; or C) run massive budget deficits that would eventually collapse the economy. Every year of delay raises the final cost of reform by trillions of dollars.
The financial world is watching. This January the international credit rating agency Moody’s said the United States is at risk of losing its top-notch triple-A credit rating. Moody’s lead analyst for the U.S., Steven Hess, told the Financial Times: “The combination of the medical programmes and social security is the most important threat to the triple-A rating over the long term. If no policy changes are made, in 10 years from now we would have to look very seriously at whether the U.S. is still a triple-A credit.”
Heritage senior policy analyst Brian Riedl says now is not the time to run away from the problem:
Today we are grappling with a very real financial crisis. While we cannot go back in time and fix it, we can start acting now to prevent the next, clearly visible crisis. It promises to be 60 times bigger than the Wall Street debacle. Is Congress paying attention?
- According to Rasmussen Reports, just 26% of American adults have even a little bit of confidence that the nation’s policymakers know what they’re doing when it comes to the current problems on Wall Street.
- New housing reports hint at price stabilization in some markets. Atlanta, Boston, Dallas, Denver and Minneapolis all reported price increases during the May-July period.
- According to Rasmussen Reports, 45% of Americans say Congress should take action, but 44% say Wall Street and the financial industry should take care of their own problems.
- Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks.
- For the first time since Rasmussen Reports began polling on the issue, more Americans believe the U.S. mission in Iraq will be viewed as a success in the long term than those who do not.