Conrad part of Obama’s team to curb federal debtSen. Kent Conrad, North Dakota’s senior U.S. senator, is one of the 18 members of President Obama’s National Commission on Fiscal Responsibility and Reform.
By: Patrick Springer, The Forum
Kent Conrad will gather around a table later this month to start work on a plan to defuse a ticking fiscal time bomb.
Conrad, North Dakota’s senior U.S. senator, is one of the 18 members of President Obama’s National Commission on Fiscal Responsibility and Reform.
Their mission: come up with recommendations to curb the mounting federal deficit and debt by the end of the year.
“My mind is open,” Conrad said. “Everything is on the table. It’s critically important that we solve the problem.”
Conrad and his fellow commission members have a daunting task. The $12.7 trillion national debt is on course to reach 63 percent of gross national product this year. Unchecked, it could soar to 90 percent in a decade.
Last month, Moody, a credit-rating agency, warned it might downgrade U.S. Treasury debt, a move that would increase the government’s borrowing costs.
Many government and business leaders agree the nation’s fiscal path is unsustainable, but Washington is unable to reach consensus on how to fix the mess.
“I believe the American people will face up to it,” said Conrad, chairman of the Senate Budget Committee. “It’s essential that we do.”
North Dakota routinely places among the top states in seeing more federal dollars flowing into the state than leaving as tax dollars. Even so, Conrad said, the state recognizes the need to be spending and taxing into balance.
“North Dakota people, I think, are very realistic,” he said. “Frankly, my concern is more with other parts of the country.”
A major part of budget reform will be to address entitlement programs – Social Security, Medicare and Medicaid – that face mushrooming costs stemming from the aging baby-boom generation and escalating health costs.
The recently passed health overhaul is a step toward helping to rein in government spending, Conrad said, although more must be done to reform the system to restrain costs, now a sixth of the nation’s economy.
Passage of the controversial reform bill, which Democrats did with no Republican votes in Congress, is an encouraging sign, even though it underscores the divide between the two major parties, Conrad said.
“It tells me we can still do hard things,” he said, adding that he is under no illusion that passing budget reform will be easy.
A reform of the revenue system, including curbing tax abuses and shelters, also will be important, Conrad said.
Not only is the federal debt ballooning, but much of the debt is held by foreigners, Conrad said. A powerful country isn’t beholden to foreign bondholders, he said.
Also, investors the world over will be closely watching to see if the United States can get its fiscal house in order. To maintain investor confidence, the country must be fiscally sound.
“I believe this is a very important turning point for the country,” Conrad said. “If we’re able to do this, I think it will be a big thing for the country.”
But, he added, financial experts have warned, “If America doesn’t get a handle on this, we’re going to be a second-tier economic power.”
The sooner leaders act, the less painful the fiscal medicine will be, he added, saying relatively modest steps, if taken early, can put the nation on a sustainable budgetary path.
Those steps should be phased in over time, beginning in two, three, and four years – allowing time for the economic recovery to be more firmly established.
Economists have suggested a debt of about 60 percent of GDP, a measure of the nation’s economic output, would be sustainable, Conrad said.
“Most economists say we can handle the debt level we have,” he said. “It’s where it’s headed” that is not sustainable.
Similarly, in Conrad’s view, annual budget deficits should be less than 3 percent of GDP. The nation will need a period of lower deficits to stabilize the national debt.
The Forum of Fargo-Moorhead and the Herald are Forum Communications Co. newspapers.