In order for the United States to continue as the world leading power the growing national debt must come under control. Secretary of State Clinton has stated that the national debt is a matter of national security. A massive $14 trillion national debt undermines American leadership and leverage internationally and raises doubts concerning the ability of the U.S. armed forces to respond to international threats and crisis in the future. Domestically popular programs such as Social Security and Medicare will no longer be on sound financial footing if policymakers continue to ignore the growing fiscal imbalances.
No sooner than the Obama debt commission released its preliminary recommendations for reducing the national debt, that criticism began against its recommendations from career politicians and various pundits from the left and the right. It was not surprising to see criticism of the commission's recommendations for overhauling Social Security come from liberal Democrats such as Nancy Pelosi. However, it was surprising to see criticism of the proposed increase in the retirement age from 67 to 69 come from commentators like Sean Hannity. All of a sudden conservatives such as Sean Hannity developed an affinity for a social program such as Social Security. Opposing the proposals of the debt commission because it is simply known as the Obama debt commission is not a valid reason for doing so. There is plenty of blame and criticism that may be targeted against Obama, W. Bush, and all of those who contributed to the debt problem in the first place. However, if there ever was a time to put partisan politics and bickering aside this is that time. Supporting the recommendations of the Obama deficit commission is in the best long term interest of the country.
What is in the best long term interest of the country is not on the mind of the majority of the American people. A recent CBS poll found that only 4% of Americans believe that the deficit should be a main priority for Congress in 2011. The majority of respondents instead identified the economy and jobs as the top issue. What the majority of the American people fail to understand is that the economy and jobs will suffer the most if the national debt is not reduced. If the government continues to borrow 40 cents for every dollar it spends, unhappy creditors will begin to sell U.S. bonds causing interest rates to spike higher. Higher interest rates will choke off the economy into a second more severe recession and even higher unemployment levels. The American people seem to believe that money grows on trees and that their government has an unlimited supply of money. The American people are not alone in believing this. Many of the elites in Washington believe the same thing, including the Chairman of the Federal Reserve Ben Bernanke who is also convinced he has an unlimited supply of money.
What caused the economic crisis we are in now was not only greed but it was also a failure in leadership and incompetence on the part of the Chairman of the Federal Reserve and career politicians in Washington. The central bankers and the career politicians will never change their ways no matter how obvious and evident their failed methods become to all objective observers. No election outcome, no Tea Party movement, no amount of criticism, no amount of ridicule will stop Ben Bernanke from printing money or lead Congress to cut excessive spending. The only thing that will bring about discipline to Washington is a revolt in the bond market. The Co-Chairman of Obama's deficit commission Erskine Bowles has warned that if Washington does not change its ways and act on the commission's recommendations the "market will force" action. A revolt in the bond market is inevitable.
Only a fool would exchange hard earned money for U.S. treasuries when Ben Bernanke persistently buys trillions worth of the same assets with printed funny money. U.S. debt holders or the bond vigilantes will eventually revolt. At this time it no longer a question of if, but a question of when the bond market will force austerity measures in the United States similar to those that are being forced on various European countries.
