Over the next several weeks, Republicans in Washington will be engaged in a critical mission: to persuade Democrats of the need to develop a plan that reins in our debt without raising taxes, which we know would kill jobs. This effort is taking place in the context of President Barack Obama's request to raise the nation's debt limit, and early indications suggest that many Democrats still need some convincing.
The key to success, in my view, is for everyone involved to view the debt limit vote as an opportunity — an opportunity to reduce Washington spending now and to save taxpayers trillions of dollars over the long term. It is also an opportunity to prevent the fiscal crisis that we all see coming, a crisis that would devastate jobs, trigger a massive foreclosure crisis and delay the economic recovery even more.
In other words, reluctant Democrats need to realize very soon that this is no mere academic or ideological debate. A failure to rein in our nation's debt would have painful and far-reaching consequences for every single American. This is why I have insisted that failing to make tough choices now poses a far greater threat to our nation's long-term prosperity than failing to raise the debt limit.
In the short term, we know that continued reluctance to lower the debt without raising taxes is hindering job creation. One study suggests that any nation carrying a debt at or above 90 percent of its economy loses one point of economic growth, which some argue is equivalent to 1 million jobs.
Washington-driven uncertainty is also inhibiting job creation. Right now, U.S. businesses are sitting on nearly $2 trillion in cash. Most would love to invest it in new products and ventures, and yet they're holding back. Why? New and proposed regulations, the unknown costs of last year's health care bill, and the widespread expectation of tax hikes tomorrow to pay for spending binges today are a big part of it. Investment follows certainty, and that's one thing this White House refuses to provide.
But another reason job creators are holding back is the uncertainty surrounding our fiscal future. Right now, Washington is borrowing roughly $4 billion every day above what it collects in taxes, more than $600 million of which goes to the interest on our debt. This troubling addiction to credit has created a situation in which nearly half our debt is held by foreign countries. If just one of them doubts our ability to repay — and the greater the debt, the likelier this is — economic calamity could swiftly ensue.
Scenarios like these seemed far-fetched just a few years ago, but the fiscal landscape has changed rapidly under Democratic control. True, both parties have contributed to a culture of overspending. Yet in just two years under President Obama, the nation's debt has skyrocketed 35 percent, from $10.6 trillion to $14.2 trillion; the annual deficit is more than three times the largest annual deficit ever recorded before his presidency, and the nation's debt is expected to keep rising year after year, as far as the eye can see.
Democratic refusal to get these deficits under control through spending cuts and entitlement reform is one reason the rating agency Standard and Poor's recently threatened to downgrade U.S. debt, and why Moody's Investor Services, which threatened a downgrade of U.S. debt earlier this month, also sees the ongoing debt limit talks as an opportunity for the parties to come together and avert a looming crisis.
Given the impact that our nation's debt has on jobs in the short term and on our nation's prosperity and success in the long term, it should not be difficult to convince lawmakers of the need for immediate action. Yet as recently as a few weeks ago, Senate Majority Leader Harry Reid was still calling for a so-called "clean" vote on the debt limit that would leave the status quo on spending and debt intact. Too many Democrats still seem to think they can just wait this crisis out, in the hopes it will go away.
Still, a consensus appears to be emerging around the Republican call to action. The president, who several months ago supported raising the debt limit without any corresponding cuts, recently directed Vice President Joe Biden to come up with a bipartisan plan to cut the deficits that he helped create. President Obama has also acknowledged in recent weeks the connection between getting our fiscal house in order and economic recovery. As he recently put it, "If we don't have a serious plan to tackle the debt and the deficit, that could actually end up being a bigger drag on the economy than anything else."
We shall see how serious the administration is about doing something truly significant. During past crises, President Obama has often seemed less interested in solving the problem than he was in giving a speech about it. But this is different. Unless we get our fiscal house in order soon, the consequences could be far more painful than some are willing to admit. The upcoming debt limit vote represents the best opportunity we have to keep that crisis at bay, foster the kind of job growth Americans desperately want, and put America back on a solid ground. Hopefully others will soon realize the time to act is now.