American government must balance its books

Brace yourselves. That was the main message to emerge this week from the president’s deficit reduction commission.

Fed Chairman Ben Bernanke and White House budget chief Peter Orszag, among the lead witnesses, warned that a failure to cut federal deficits could permanently cripple the nation’s prosperity.

Recent events in the money markets reinforce the gloomy forecasts. Last month, Moody’s Investors Service served notice that top-rated U.S. Treasury bonds could be downgraded some day if the government can’t stem the tide of red ink.

As if to prove the point, days later the Treasury briefly had to pay higher interest rates for its bonds — supposedly the safest of investments — than the most creditworthy private companies. In yet another sign of the dollar’s weakness, China and Japan are showing less enthusiasm these days for buying U.S. debt.

Translation for crisis-doubters: It’s later than you think.

Avoiding a debt disaster won’t be easy because the options are politically toxic. There are only two ways to cut the deficit — raise more revenue or reduce services — and partisans on both sides are gearing up for a no-holds-barred fight.

“Take Social Security Off the Table for Deficit Reduction,” said the powerful seniors’ lobby AARP. On the other side, some House Republicans were equally insistent: “The commission’s first act should be to take tax increases off the table,” said Rep. Patrick McHenry, R-N.C.

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