“This is the most predictable crisis in the history of our country,” he went on. “We are on our path to a debt crisis” like those we’ve seen recently in Europe, with the national debt as a percentage of gross domestic product rising, under Barack Obama’s budget, past the 90 percent danger point on its way to 800 percent.
At some point in between, as Harvard economist Kenneth Rogoff explains in the Financial Times, interest rates spike upward and the government is forced to make draconic cuts.
Those Social Security checks? They can be cut any time, as the Supreme Court held in Flemming v. Nestor in 1960. Congress can do that just as quickly as it voted $700 billion to bail out the banks in fall 2008.
Ryan’s budget attempts to prevent that by restructuring taxes and spending programs so that the national debt as a percentage of GDP will start sliding down.
Tax rates would be lowered and the tax base broadened, much as Congress did in 1986. Federal spending would revert to 2008 levels and be frozen for five years.