The Danger Zone: David Gergen Warns State Policymakers About Rising National Debt
Great nations can come crashing down in just one generation—not thousands of years as conventional wisdom dictates. That’s according to David Gergen, senior political analyst for CNN and professor at the John F. Kennedy School of Government where he is also director of its Center for Public Leadership.
“We’re into that caution light that is blinking at us saying, ‘watch out guys, we’re in serious trouble,’” Gergen said of America’s financial standing at Sunday’s opening session at The Council of State Governments 2010 National Conference.
What he means is the nation’s debt is reaching a tipping point of 60 percent of its gross domestic product. Gergen refers to this as the danger zone, where policymakers can step back and take action or sit back and do nothing. If the debt continues to grow, Gergen predicts it could reach 100 percent of its GDP in 10 years or less.
And, taking lessons from history of other failed nations, a nation’s debt that’s 100 percent or more of its GDP means a fall for the country—a crash and fall from superpower status. Greece, Italy and Portugal crossed the 100 percent debt mark of GDP already.
Debt in the U.S. historically averaged 36 percent of GDP, Gergen said. But in the last 10 years, things have taken a turn for the worse. Politics, Gergen said, had a lot to do with it.
“We’ve taken off the controls of spending and taxes. This is a bipartisan problem,” he said. “Essentially, it’s been in part, the disappearance of a political middle man ... (there’s) nobody in the middle who is trying to negotiate and keep those things in balance.”
Federal health care reform isn’t helping much, either.
“I don’t think we know how to solve this medical health problem which is the driver … it is the biggest problem that was left unsolved by the Obama health care,” Gergen said. “While it aimed at a very important target to get everybody insured—it did so without fixing the bill in a bipartisan way and it’s left us without fixing the cost problem.”
As a result, the nation is left with an unstable health care system and that makes the job of chipping away at the mounting deficit all the more challenging, Gergen said.
If policymakers do nothing to rein in spending and inflation continues, the nation could become heavily indebted to creditors—other nations that loan money to the U.S., Gergen said. That’s a shaky situation to be in, particularly when another country controls the purse strings.
“Increasingly, we’re putting ourselves in the position where other nations can dictate to us what we’re going to do … and that’s why it’s so important for us to get this debt under control.”