Whether a Republican, Democrat or an independent, most everyone agrees that the massive national debt is a critical threat to America’s long-term growth and prosperity. On Wednesday, former Secretary of State James A. Baker, III, joined former Secretary of the Treasury Robert Rubin for a bipartisan forum on the economic and foreign policy implications of the debt crisis, which Baker called “a ticking time bomb.”
“A broad bipartisan agreement is going to be necessary if we’re going to be able to stabilize our debt,” said Baker, who also served as secretary of the treasury. “It is critical that Americans of goodwill, Republicans, Democrats and independents alike push our elected officials to make the compromises necessary to get on a sustainable economic track. The alternative of political gridlock and a diminished place for the United States in the global economic arena is unacceptable.”
Convened by former U.S. senators Sam Nunn, D-Ga., Pete Domenici, R-N.M., Warren Rudman, R-N.H., and Evan Bayh, D-Ind., the forum was the first of four that will be held before the first presidential debate. The event, held at the Center for Strategic and International Studies (CSIS) in Washington, D.C., was streamed live online, with Baker participating via satellite.
Baker said the foreign policy implications of the growing and unsustainable U.S. debt are tremendous. “Such a state of affairs could impair the state of the U.S. dollar and its role in global currency,” he said. “It will constrain the ability of our government to pursue an independent monetary and fiscal policy. More generally, our debt crisis runs the risk of undermining our leadership abroad … our strength abroad depends on our economic health at home.”
Based on many years of experience that include tax reform and Social Security compromises, Baker outlined five points that should be part of any plan to address the national debt:
1. Start by recognizing that any plan should be realistic, Baker said. “The idea that we will solve our huge debt problem by raising taxes on the rich is, of course, a total fantasy.” The so-called “Buffet tax” is projected to raise $50 billion over 10 years, a tiny fraction of total federal expenditures.
2. Strike a pro-growth balance between revenue increases and spending.
3. Include up-front expenditure cuts. “There should not be tax increases until the spending cuts have been made or at least legislated … If you don’t, you run the risk of raising taxes while deferring tough decisions on spending.”
4. The plan should have a spending cap.
5. Have a strong enforcement mechanism. “You need that because … a future Congress can and will simply disregard the provisions of any bargain. There’s always a good reason — if not economic, then political — to spend more,” Baker said.
Given the polarization of politics today, Baker said he is “far from confident” that a “grand bargain” on the debt can be struck by Congress. However, he said, “We need to make a heroic effort [to reach a compromise]. It’s about the future of our country, the future of our children and grandchildren. The prize, of course, is a future in which our country prospers, our citizens can flourish and we can protect our interests abroad.”
Wednesday’s bipartisan forum was a joint project of The Concord Coalition, The Bipartisan Policy Center, the CSIS, the American Business Conference, Rice University’s Baker Institute, the Hoover Institution at Stanford University, and the Belfer Center for Science and International Affairs at Harvard University.