10/20/2010 01:10 pm ET | Updated May 25, 2011

A New Call to Economic Arms

The National Commission on Fiscal Responsibility and Reform (a.k.a. the debt commission), led by former Clinton White House chief of staff Erskine Bowles and former U.S. Senator Alan K. Simpson, R-Wy., unveiled their much anticipated recommendations to balance the federal budget. Not since 1992 has there been such a national focus on deficit reduction and the national debt.

Almost 20 years ago, Paul Tsongas, a Democratic U.S. Senator from Massachusetts, campaigned against then Arkansas Gov. Bill Clinton for the Democratic presidential nomination. On the cover of Time magazine in March 1992, the caption read, "Clinton vs. Tsongas: A no-holds-barred debate about how to fix America's economy."

At the time, unemployment had peaked at 7.8 percent and the U.S. was slowly crawling out of recession. But the real focus was on the structural imbalances of the federal government's annual budget, which had created hundreds of billions of dollars in deficits in the 1980s and early 1990s. Between 1981 and 1992, the national debt, which is the accumulation of prior deficits, had swelled from approximately $1 trillion to $4 trillion.

A socially liberal but fiscally moderate Democrat, Tsongas made deficit reduction one of the hallmarks of his presidential campaign. In his campaign book, A Call to Economic Arms, Tsongas painted a bleak economic picture of a country suffocating from "crushing and unsustainable debt." A fiscal collision course could only be averted if the federal government reigned in spending, cut wasteful programs and otherwise balanced government expenditures with government revenues.

Tsongas's message was deliberately alarming to draw attention to the nation's growing fiscal problems. Today, there is a new battle cry for deficit reduction and fiscal prudence. This time the stakes are much higher.

Over the past eight years, the U.S. government has consistently spent more money than it receives in revenue, in large measure to fund the wars in Iraq and Afghanistan and to stimulate economic growth to help lift the U.S. out of recession. The consequences of this overspending have been increasingly larger budget deficits, which began in the Bush administration and continue today.

Between 2002 and 2008, the country's budget deficit averaged $475 billion per year. In 2009 and 2010, the annual deficits jumped to $1.5 trillion and $1.3 trillion, respectively. The late Everett Dirksen, a conservative U.S. senator from Illinois, was rumored to have said, "A billion here, a billion there, and pretty soon you're talking about real money." Now, trillion is the catchword.

Even more alarming is the national debt, which has reached $13 trillion and is 95 percent of the country's gross domestic product, the highest debt-to-GDP ratio since World War II. By 2015, it is expected to reach $19 trillion. This year alone, the annual interest expense on the debt is more than $400 billion. Meanwhile, China has become the largest foreign holder of U.S. Treasury bills that are used to finance our budget deficits.

Over the past two years, American households and businesses have witnessed the severe consequences of having too much debt: foreclosed homes, bankruptcy, downgraded credit ratings, and higher interest costs to access credit markets. On a sovereign level, unsustainable government borrowing can reduce economic growth and severely curtail the government's ability to use fiscal policies in the future to combat an unforeseen crisis.

The social costs are also considerable. Last summer the world saw frightening images of social upheaval in Greece and other European countries that were forced to impose strict austerity measures to pay down their government debts. The recent bailout of Ireland has further rattled the euro zone as well as global credit markets.

Republicans and Democrats in Washington are equally to blame for America's fiscal imbalances. They have tried to be all things to all people at the expense of a future generation of Americans who will have to pay back the federal government's debt.

Unfortunately, there is no easy solution. At a time when the demand for government services continues to grow, the recommendations of the debt commission will undoubtedly be tough to swallow, especially reforms involving politically charged entitlement programs such as Social Security, Medicare and Medicaid. A divided Congress next year will make consensus building even more difficult.

No doubt reducing the deficit will require political sacrifices and personal courage. Republicans and Democrats will have to put aside their ideological playbooks. Similar to what Bill Clinton did when he was president, the Democrats will need to move closer to the center and embrace deficit reduction. And Republicans, with their newfound majority in Congress, will have to show the American public that they will do more than say, "No, we can't" to the White House. The public wants results, not obstructionists.

During the financial crisis in 2008, Washington was outspoken about the dangers of debt and leverage in the financial system. Now it is time for our elected leaders to focus on their own financial house and put America back on a prudent fiscal trajectory. Taking seriously the debt commission's recommendations will help move the country closer to addressing the fiscal challenges that threaten our economic future.

John Stimpson served as an aide to former Massachusetts Governor William Weld. He lives in New York City.