Avoiding a debt and currency crisis and its economic fallout requires ideas and political will.
Americans voted for divided government last week. Democrats retained control of the Senate, and Republicans look set to gain control of the House by the slimmest of margins. Neither party has a clear policy mandate. A partisan stalemate is likely to produce congressional investigations and fiscal brinkmanship. And the 2024 presidential campaign has already begun. What we don’t see in our national politics is a serious discussion about the political and economic challenges the country faces.
The nearly 250-year-old system of American-style self-governance is facing a challenge from China and other authoritarian regimes. Totalitarianism, once thought to be consigned to history after the West’s victory in the Cold War, is back, competing for dominance in the digitized world. Before Western democracies can face down external threats, they have to muster the will to tackle their major internal challenges.
U.S. fiscal policy is on a collision course with monetary policy. The economic devastation resulting from a debt and currency crisis could inflict enormous—possibly irreparable—damage. Predicting precisely when a huge debt and high deficits will unleash economic disaster is difficult. The dollar’s status as the world’s reserve currency gives the U.S. unique advantages, but no country can defy the laws of economic gravity forever. The U.S. has run up large budget deficits and debts before, but those moments of national emergency, such as world wars or global financial crises, were usually—at least until recently—followed by periods of fiscal repair.
The difference now is that various factors—demographics, health, inflation, declining labor-force growth and declining productivity—have built in an unsustainable rise in the national debt. The federal government is making promises to citizens that it can’t keep. The social contract to help the neediest is at risk, as is the implicit promise of the American dream—that each generation will have the chance to do better than the previous one.
The bad news is that our politics are fundamentally unserious. The good news is that a fiscal crisis is still avoidable. But the window of opportunity to prevent it is closing.
We are not powerless. Holding off catastrophe is a matter of summoning the will. In “American Renewal: A Conservative Plan to Strengthen the Social Contract and Save the Country’s Finances,” Angela Rachidi and I, along with 18 center-right scholars, outline how leaders can couple reforms to our social safety net with economic growth.
The book provides concrete proposals for increasing competition in Medicare and customizing Medicaid so they can meet the needs of individual states’ populations. The plan calls for strengthening Social Security so it is there for current and future generations. It also provides stability for the Social Security Disability Insurance Trust Fund so we fulfill our promises to the most vulnerable members of society. It proposes solutions to our child-welfare system, early-childhood programs and K-12 education and acknowledges that we are failing to prepare America’s youth for the challenges of the 21st century. The proposal calls for making our tax code simpler and oriented toward growth and for a monetary policy that preserves the dollar as the world’s reserve currency.
The plan provides a path out of our expected economic malaise so the U.S. can show the free world that democracy still can solve its great problems. It demonstrates that with political courage, policy makers can increase federal spending more predictably and sustainably. That will stabilize the national debt at affordable levels, modernize the dollar, and demonstrate that we can run reliable, solvent health and retirement systems.
By harnessing new technologies, such as digital wallets with programmable benefits, we can advance a social safety net that encourages family and work. By reinvigorating federalism and strengthening civil society, we can rebuild communities. With a modernized tax code wired for growth, we can make American businesses more competitive, raise living standards, and foster both economic growth and responsible environmental stewardship.
For centuries, the U.S. has shown the world what self-determining people can achieve. We built a society based on the consent of the governed that established a social contract to provide for citizens in times of need.
But the policies and programs underpinning our social contract were mostly designed during the 20th century in ways that are proving unsustainable in the 21st century. Thankfully, and primarily due to advancements in the private sector, prudent reforms and policy changes that are outlined in our book will fulfill the promise of these programs sustainably. What’s more, the economic dynamism that we enjoyed in the 20th century can be repeated in the rest of the 21st—if we act.
The fiscal challenges addressed in our book are a great test of American democracy. Ours may be the first generation whose children are worse off than its own members. If we do nothing, a fiscal and economic calamity awaits.
If we stabilize our debt, revitalize our economy and restore the promise of upward mobility, we can write a great chapter in the American story. This will require innovative policy ideas, political courage and a commitment to serious politics.
Mr. Ryan served as House speaker, 2015-19. He is distinguished visiting fellow in the practice of public policy at the American Enterprise Institute and a member of the board of Fox Corp.
Appeared in the November 17, 2022, print edition as ‘A Plan to Save America’s Finances’.