THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, November 12, 1995 TAG: 9511100022
SECTION: COMMENTARY PAGE: J4 EDITION: FINAL
TYPE: Opinion
SOURCE: By JOHN W. SNOW
LENGTH: Medium: 85 lines
Today the outstanding balance on our national credit card that we call the federal debt stands at $4.9 trillion. That number is too big to make sense to most of us; however, it equals $18,000 of debt for every man, woman and child in America.
Interest payments alone on that debt totaled $235 billion this year, or more than was spent in federal programs on education, training, employment, social services, energy, public works and child nutrition combined.
At the current pace, federal spending which now accounts for 22 percent of the gross domestic product (the value of all goods and services produced in the nation in a year) will consume approximately 37 percent of all economic output in 2030. This means more than one-third of all economic activity will be carried on by the federal government early in the next century.
This growth in federal activity as a percentage of the total economic output has, over time, reduced the pool of savings, or capital, available to invest in the private sector of our economy. As a consequence, economic growth has slowed, interest rates have risen and inflationary pressures have increased.
After nearly three decades of chronic federal deficits, this situation will get nothing but worse unless we begin the difficult process of weaning ourselves from the credit-card habit.
This year we have an unprecedented opportunity to take the first steps toward fiscal recovery. Both political parties have legislative plans to balance the federal budget by a certain date - 10 years in the case of the administration and seven in the case of the Republican-controlled Congress. While the plans have important differences, both recognize the need to act now.
The mere fact that both political parties and the vast majority of independent voters agree we need to balance the federal budget should underscore the importance of the issue. It appears that the more Americans have come to know the facts about the economic impacts of long-term federal overspending, the more we recognize the need to take action now.
We risk leaving our children and grandchildren to face an economic crisis and the much tougher choices than those currently being debated in Washington.
Together with interest costs, rising entitlement spending is the major cause of the growing economic burden posed by continuing deficits. The word ``entitlement'' refers to direct government payments; and there are four programs that make up more than 75 percent of these expenditures: Social Security, Medicare, Medicaid and federal pensions. Government spending is the fastest-growing federal expenditure in large part due to population changes.
People over 65 are now the fastest-growing segment of the U.S. population, and thanks to advances in medicine and disease prevention, Americans are living longer and collecting benefits longer than ever before. The work force, meanwhile, is one of the slowest-growing segments. When the ``baby boom'' generation begins to retire in the next seven years, there will be only three working people for each retired person, as compared to five today.
It is clear that all federal spending should be on the negotiating table, including entitlements such as Medicare. Interest payments on the nation's debt will come down over time as the federal budget moves toward balance and government has to borrow less.
What we as Americans should expect of our elected leaders is that decisions to reduce federal spending be made fairly, so that all segments of our society and institutions share equally in the burden of solving the problem.
Benefits of moving toward a balanced budget will accrue to all Americans.
Once Congress and the president agree on a credible plan to reduce federal spending and balance the budget, or come closer, investor confidence in our economy will increase. Interest rates will begin to decline - most experts agree on a 1 to 2 percentage-point reduction - and more capital will be available to invest in private-sector business and industrial activity.
Our economy will pick up speed, generating more business expansion and more jobs. Inflation pressures will ease and Americans' incomes will rise. As the economy grows and interest rates come down, we will have more of our hard-earned money to invest as we see fit. This benefits business and individuals equally.
We've not had an opportunity like this in more than a generation. Tell Congress and the president to agree on a balanced-budget plan today. MEMO: Mr. Snow is chairman and chief executive of CSX Corp., headquartered in
Richmond, and also chairman of The Business Roundtable, an organization
of 200 CEOs that focuses on economic implications of national-policy
issues. by CNB