A prominent Republican senator who Barack Obama once considered to be his commerce secretary is warning that the administration’s fiscal policies could put the U.S. on the path to “banana republic” status.
Sen. Judd Gregg, R-N.H., told CNN’s John King on Sunday’s “State of the Union” program that standards of living will drop in the U.S. if the administration’s 10-year spending projections prove to be accurate. Under existing projections, the public debt held by the federal government will grow from around 40 percent of the nation’s gross domestic product today to over 80 percent 10 years from now.
“Now you can’t blame that on [former President] George [W.] Bush,” Gregg told King.
According the Bureau of the Public Debt, over $1.1 trillion has been added to the publicly held portion of the national debt since Obama became president in January. That roughly equals 75 percent of the approximately $1.6 trillion that was added during all eight years of the Clinton administration.
The senator said the current policies being enacted by Congress are chiefly to blame for both the current $1.42 trillion deficit and the potentially disastrous fiscal projections.
“You talk about systemic risk. The systemic risk today is the Congress of the United States,” Gregg told CNN. “[W]e’re creating these massive deficits, which we are passing on to our children. We’re going to undermine fundamentally the quality of life for our children by doing this.”
The figures, he said, “mean we’re on the path to a banana republic type of financial situation in this country. And you can’t just do that. You keep running these [federal] programs out [into the future] and not paying for them. And you can’t keep throwing debt upon debt.”
In July, the nonpartisan Congressional Budget Office released a report warning the nation’s future fiscal trend could cause foreign investors to question the federal government’s fiscal solvency and make them hesitant to provide enough funds for the federal government to meet its obligations.
“The rising debt would reduce the size of the domestic capital stock (businesses’ equipment and structures as well as housing) and decrease U.S. ownership of assets in other countries while increasing foreign ownership of assets in the United States,” CBO wrote in its report. “Those changes would slow the growth of the gross national product and, as the debt burden rose, could eventually lead to a decline in economic output.
“By then, whether the government resolves the fiscal crisis by printing money, raising taxes, cutting spending, or by going into default, economic growth will be seriously disrupted.”
Gregg called Democratic plans to avoid otherwise mandatory Medicare cuts without finding a funding source to cover the projected $250 billion expense over the next decade “gamesmanship.”
The senator said the health care bills that have been passed out of committee by the Senate Finance and Health, Education, Labor and Pensions committees would be a huge expansion of government the nation can ill-afford in the nation’s current fiscal condition.
“You are talking about taking the government and growing it by $1-2 trillion over the next 10 years,” Gregg said.
He warned doing so would have a “very debilitating effect” on the entire economy and the ability of Americans to get health care in the future.
Gregg also responded to accusations by Republican-turned-Democrat Sen. Arlen Specter of Pa. that his former party was being obstructionist in the health care reform debate.
“Well, I suppose he has to call us something since he’s left the party,” he said.
He responded to Democratic charges the GOP had become “the party of no” by pointing to the alternative health care reform bills that he and other Republicans had offered, most notably the bipartisan health care bill offered by Sens. Robert Bennett, R-Utah, and Ron Wyden, D-Ore.