Washington is gearing up for a big debate: What to do about the exploding national debt, the unsustainable annual budget deficits and what to do about the Bush tax cuts that expire at the end of the year.
Alarm bells are ringing over the size of the national debt, now equal to 84 percent of the country’s gross national product — the highest level since after World War II. The credit-rating agency Moody’s is hinting that the federal treasury’s Triple A bond rating is in jeopardy and Fed Chairman Ben Bernanke is warning that China, the United States’ largest foreign creditor, may start charging higher interest rates.
“The arithmetic is, unfortunately, quite clear,” Bernanke said. “To avoid large and unsustainable budget deficits, the nation will ultimately have to choose among higher taxes, modifications to entitlement programs such as Social Security and Medicare, less spending on everything else from education to defense, or some combination of the above.
“These choices are difficult, and it always seems easier to put them off — until the day they cannot be put off any more.”