John Rash: Debtor nations facing unsustainable entitlements

  • Article by: JOHN RASH
  • Updated: April 28, 2010 - 6:52 PM
The pictures couldn't have been more different.

Grave European Central Bankers sat at a news conference about the debt crisis contagion engulfing Greece, Portugal and now, maybe, Spain.

A day before, a smiling President Obama walked into a Rose Garden press event with the cochairmen of his bipartisan debt commission, former U.S. Sen. Alan Simpson and former Clinton White House Chief of Staff Erskine Bowles.

The Washington grins likely could turn grim, however, when considering the trajectory of the national debt, which is currently estimated at over $12 trillion.

"Everything has to be on the table," the president told the commission.

That's evident to many economists. "I worry that in the U.S. economy, as you look at some of the entitlement commitments we're making long-term in terms of Social Security and Medicare, that it's not sustainable, and that it could catch up to us, too," said Art Rolnick, senior vice president and director of research at the Federal Reserve Bank of Minneapolis.

His Fed colleague, Chris Phelan, who is also an economics professor at the University of Minnesota, agrees: "We're not immune to this sort of thing. We have a different name for our Greece: It's called California."

The commission's recommendations are due Dec. 1, just a few weeks after the November midterm elections. That's a shame, not just because the longer the country waits, the worse the debt festers, but because voters would benefit from carefully calibrating candidates' reactions to the commission's findings.

Simpson can already predict how some will react: "The extreme right and the extreme left will savage our final product."

But America literally can't afford extremes in a situation that's, well, extremely dangerous. Now more than ever, the left-right ideological rigidity that has marred both the Bush and Obama eras needs to yield to reasonable compromise, lest it's Federal Reserve, not European Central bankers, looking grave and searching for answers to a Greek-style debt crisis.

JOHN RASH

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