Is there a spending crisis in America?

Question: Is there a spending crisis in America?

Robert Hormats: The big problem for the United States today, from a financial point of view, from a fiscal point of view, is that we lack a sense of prioritization. And we, as a government and as a country, have made commitments to coming generations, of retirees in particular, that we can’t fulfill. The commitments that are made to retirees in the social security system to people through Medicare and Medicaid are enormous. And the resources are simply not available and won’t be available to meet those commitments 10, 15, 20 years down the road.

The other is that we don’t set current priorities very well. We tend to think we can pay for a war in Iraq. We can pay for domestic programs. We can finance this earmarking or pork barrel spending in Washington. We can do all those things. We don’t really have the political cohesion in this country to set tough priorities.

In other wars of the past, when the country goes to war, and the troops need to be supported when they’re abroad, then programs – for instance domestic programs, particularly pork barrel programs, unnecessary programs – tend to be cut back. That didn’t happen after 9/11. It didn’t happen at the beginning of the Iraq War. And in most cases you have tax increases when the country goes to war to provide more resources for the war. We didn’t have that either.

One can understand that because the economy was weak; but it’s much harder to justify continuing along the merry road of increased domestic spending on things that are simply not essential, that are there because politicians think they’re useful for their own domestic constituencies.

So we have a problem of a narrowness in our focus, a sort of short term myopic point of view of finance; and making commitments for the future which we simply can’t meet; and also an unwillingness to set tough priorities in the current environment. And ultimately that gets us into trouble. It will get us into trouble.

 

Recorded On: July 25, 2007

The US government is making commitments to retirees that it can't fulfill.

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