Policy Perspectives are posts authored by Resident Fellows at Harvard’s Institute of Politics. Viewpoints expressed herein are exclusively those of the Resident Fellow and not endorsed by the Institute of Politics.
Authored by Spring 2013 Fellow John Murray
What does all this talk about “sequestration” this week actually mean? Sequestration is the automatic spending reductions put in place by the Budget Control Act of 2011 that amount to $1.2 trillion in cuts (over 10 years). This measure was taken as a kick-start to address Washington's annual budget deficits and the national debt it has left us. But what does the debt all really mean for families and why should we care?
You don't need me to tell you that America is at an economic crossroads. The continuous budget deficits that drive up our national debt are an underlying cause of long-term economic stagnation in America. Our country’s national debt of over $16 trillion is larger than the entire U.S. economy of roughly $15 trillion per year.
This means our country’s debt-to-GDP ratio is over 100 percent. So what? Well, Harvard economists Carmen M. Reinhart and Kenneth S. Rogoff concluded that when countries level of debt balloon to over 90 percent of their GDP, there is a “risk to long-term growth and stability.”
If you want to know what this looks like in reality, check out Greece and Italy, whose economies have been on a tumultuous downward spiral driven by debt-to-GDP ratios of about 150 percent and 120 percent, respectively. Now remember where we are – it’s not really that far off.
Will America reach a level where we might not be able to pay basic bills for things like public safety and our military because we must pay interest on the debt? If we keep on growing our debt, we very well may. . And American families will continue to struggle to find work and pay higher taxes, all while receiving less from a bloated Washington bureaucracy.
Instead of solving this problem, the President is playing the usual Washington game of campaign-style rallies trying to divert blame and ignoring the fact that the looming sequester was his idea. Looking for leadership from Senator Harry Reid? Forget it.
Congressional Republicans on the other hand have actually acted to get the country’s balance sheet back on track and that includes enacting real spending cuts. To be clear, spending cuts alone are not the answer, but if we are serious about our fiscal trajectory then we have to have an intervention. If the President and Senator Reid don’t like this approach, they can come up with another one, but let’s stop kicking the can down the road. There is a better way, and a brighter future. But that requires more than political rallies. Real spending cuts are needed.
John Murray is the former Deputy Chief of Staff to US House of Representatives Majority Leader Eric Cantor and Founder and President of the YG Action Fund Super PAC and the YG Network, an advocacy non-profit aimed at supporting center-right policies and those who fight for those policies. Murray's background focuses on health care policy and communications.
John Murray conducts a weekly study group every Monday from 4 p.m. to 5:30 p.m. called "Through the Looking Glass: Examining the Intersection of Politics, Policy, and the Future of the Conservative Movement."