Americans who delve into the $3.6 trillion federal budget in search of easy fixes to the nation's debt problems might not like what they learn, the author of a recent book on the issue said Friday in Minneapolis.
The spending cuts and tax increases required to solve the nation's considerable debt problems will affect everyone, author David Wessel said during a visit that included a talk before the Economic Club of Minnesota.
"People who think we can reduce the deficit without affecting them are living in a fantasy," said Wessel, economics editor at the Wall Street Journal. "There are just not enough other people to tax. There are not enough other people whose benefits can be cut to solve this problem, but most people kind of think it can be solved on someone else's back, and frankly the candidates are pandering to that view."
Wessel was in town promoting his book "Red Ink: Inside the High-Stakes Politics of the Federal Budget." It was the Economic Club's first event of the fall. Next up is Agustin Carstens, governor of the Bank of Mexico, in October.
Wessel believes Americans know that the budget, deficits, and the national debt are important, but they're confused in part because politicians, budget officials and journalists have made it all nearly impossible to understand.
Many of the issues can be broken down into simple choices, Wessel said. For instance, how many aircraft carriers does America need?
The Navy has 11 aircraft carriers, more than the rest of the world combined. They cost $11 billion each. Even decommissioning one costs $2 billion, because of the nuclear reactor inside.
"The Navy wants to replace one aircraft carrier every five years for the rest of my life, and then some," Wessel said. "$11 billion is a lot of money. $11 billion is the same sum that Medicare spent last year to replace hip, shoulder, and knee joints for 750,000 elderly people."
But Wessel didn't talk only about defense spending. Health care will be 33 percent of the federal budget in 10 years. That's because baby boomers are retiring and enrolling in Medicare in vast numbers, and the cost of health care is growing faster than everything else. This will require Americans, and their elected representatives, to make hard decisions.
The United States has avoided these decisions by borrowing money, namely from China. This works because China, which has a lot of money, has no better option for what to do with it.
Japan has twice as much debt proportionally as the United States, and Europe is struggling to hold together its currency union. Because Treasury bonds are the least bad investment for China, the United States -- or in Wessel's words, "the world's tallest midget" -- is able to borrow money at extremely low interest rates.
But that won't last forever, he said. "It has allowed our political leadership to argue about this problem without doing anything about it."
Adam Belz 612-673-4405