I speak to you tonight from the Oval Office, from which earlier presidents have come to you in times of crisis.
We, too, are facing a crisis. To put it simply, we are living on borrowed time and borrowed money. Here in Washington, we are spending far more than we are raising in revenues each year and, as a result, we are generating huge budget deficits. And, just as any family would suffer the consequences of doing that, we as a nation will suffer as well.
Our problems may come gradually, as we spend more of our national income to pay our debts.
We won’t have the resources to invest in our economy, and our children and grandchildren will live less well than they should.
Or they may come suddenly, as those who finance our deficits – particularly our foreign creditors – lose confidence in our ability to pay them back. That could cause the dollar to collapse or interest rates and inflation to soar, and any of those things would send our economy back into a deep recession.
This is not just a crisis for politicians in Washington. This is our crisis as a nation, and ours to solve together.
I know it’s easy to think that we just need to cut the waste from government and close loopholes in our tax system and our deficit will disappear. That’s what politicians of both parties have been telling you for years. And of course – of course! – we should cut all the waste and close all the loopholes we can find.
But, my fellow Americans, this challenge is far larger than that. It does not lend itself to simple, pain-free solutions. It’s rooted in the basic services that our government provides – and that we all want.
That’s what I want to focus on tonight – in a way that no president has ever done.
Please look at this chart to my right. It’s the chart that I asked newspapers and web sites to publish in anticipation of this address tonight. It shows how the federal government spends your money.
As you can see, we spend 40 percent of your tax dollars on Social Security, Medicare, and Medicaid, the programs that provide benefits for retirees and health care for senior citizens and the poor. We spend 21 percent for national security programs, which we can all agree that we need. And we spend 8 percent for interest on the national debt, which we must pay to our lenders.
All together, that’s 69 percent of our budget. The other 31 percent goes for everything else that our government does – from paying veterans benefits, to helping our kids get a good education, to protecting the environment, to conducting scientific and medical research.
Meanwhile, you pay taxes to support all of these vital services – income taxes, payroll taxes, excise taxes, and so on.
But the taxes do not match the spending, and the gap between them is our deficit. Last year, we fell short by $1.4 trillion. That was largely because of the deep recession and the steps we took – the previous administration and mine – to stabilize our financial system and restore our economy.
But here’s the important thing: Even after the economy recovers and these temporary steps expire, we will face deficits of about $1 trillion a year for about the next decade and even higher deficits after that.
No single president and no single Congress caused this long-term crisis. Three factors lay behind it:
First, as you know, health care costs are rising far faster than inflation. They are raising health care costs not only for our businesses and workers, but for our public programs as well. That’s a big reason why Medicare and Medicaid are growing so fast. And that’s why we included provisions in the recent health reform bill to at least begin to slow the growth in health care costs. But we need to do much more.
Second, in the next few years, the “baby boomers” – the first generation of Americans born after World War II – will begin to retire. That will make tens of millions more Americans eligible for Social Security and Medicare, and those programs will grow very fast as a result.
Third, as those programs expand and our government grows as a result, revenues will not grow enough to offset the costs.
My fellow Americans, we have some very tough choices ahead of us.
We can let Social Security and Medicare and Medicaid grow as they will, which will make it harder and harder to find the resources for national defense and homeland security, education and research, and everything else. In fact, if we let this continue, then our deficit will grow and, eventually, the federal government will be doing nothing more than providing Social Security, Medicare, and Medicaid and paying interest on the debt.
Or, we can do something about it.
- We can examine Social Security and Medicare and Medicaid and take steps that will slow their growth over time.
- We can raise revenues, which will reduce the cuts that we have to make in Social Security, Medicare, and Medicaid.
- And, of course, we can examine everything else in the budget to eliminate programs we don’t need, cut all the waste we can, and close tax loopholes.
But, we must stop pretending that cutting waste and closing tax loopholes alone will solve this crisis. It’s simply too big.
We must stop pretending that this crisis is someone else’s fault – the fault of Democrats who don’t want to cut spending, or Republicans who don’t want to raise taxes.
In the coming days, I will offer a balanced set of proposals to begin to address it. Yes, I will propose ways to cut waste and close tax loopholes, and I invite others to offer additional suggestions.
But, make no mistake: I will also propose changes in Social Security, Medicare, and Medicaid, and changes in revenues.
Although I will propose that these changes only take effect when the economy is strong enough to absorb them, I believe that we should get to work – now – to decide what those changes should be.
To those in Congress who don’t like my ideas, I ask only that you propose others. Do not simply criticize. Work with me to address this crisis.
My fellow Americans, our forefathers faced challenges far greater than the one that confronts us today – a Civil War, a Great Depression, two World Wars, and a Cold War after that – all of which threatened our very existence as a nation.
Each of these generations of Americans surmounted the hurdles in their way and made our nation stronger.
This is our challenge. I believe that we, too, will succeed.
Let’s get to work.