Now Is the Time for US to Deal with Long-Term Debt

Now that short-term budget crises have been averted, it’s time to attack the government’s bulging long-term debt, says Pete Peterson, co-founder of Blackstone Group.

“The principal threat to America’s future is our unsustainable long-term debt and deficits,” he writes for Politico.

“Even after these recent budget deals, over the next 30 years, public debt is projected to race past an unprecedented 200 percent of GDP [gross domestic product].”

Cutting defense spending and entitlements and raising taxes all have to be included in a solution, writes Peterson, now chairman of the Peter Peterson Foundation.

“As to defense, there are significant opportunities for smart, strategic savings geared to the threats of a new era — not the crude, across-the-board cuts of the sequester,” he says.

When it comes to taxes, Republicans must accept the necessity of increasing revenue, Peterson explains. “Simple math makes any reform package without revenues not only draconian, but politically impossible.”

On the subject of entitlements, “two principles of reform should prevail,” he maintains.

“First, we simply must preserve the safety net for the vulnerable. Reforms should start by asking the relatively well-off to contribute more and receive less. … Second, retirees need time to plan for policy changes.”

Harvard economist Gregory Mankiw’s concern about debt is that President Barack Obama appears content to stabilize the debt-to-GDP ratio around its current level of 77 percent.

“This goal, hard to reach as it might be in the current political environment, is still too modest,” he writes in The New York Times.

“The problem is that budget projections are based on forecasts, and such forecasts exclude the extreme events that have historically driven up government debt. Military and economic catastrophes are, by their nature, unpredictable.”

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