July 13, 2010

O’Malley reacts cautiously to warning on national debt

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By Len Lazarick
Len@MarylandReporter.com

The heads of a presidential commission on the national debt warned the nation’s governors at their annual conference Sunday that the country’s growing debt was “a cancer” that could be a bigger problem than the current recession.

But Maryland Gov. Martin O’Malley said “the candid and honest” remarks from the Democratic and Republican chairs did not mean that states should not expect additional short-term aid from the federal government.

“Their message was a message of austerity, while at the same time acknowledging that we had little choice but to stimulate the economy when they did the recovery and reinvestment act,” O’Malley told MarylandReporter.com in an interview.

“We’ve got a double challenge here,” O’Malley said. “We’ve got to protect a very fragile recovery at the same time as we deal long term with a level of debt that in 10 years will be even more crippling than this recession is.”

At a meeting of the National Governors Association in Boston Sunday, Democrat Erskine Bowles, former chief of staff to President Bill Clinton, and Republican Alan Simpson, a former Wyoming senator, “offered an ominous assessment of the nation’s fiscal future here Sunday, calling current budgetary trends a cancer ‘that will destroy the country from within’ unless checked by tough action in Washington,” according to a report by Dan Balz in The Washington Post.

“We can’t grow our way out of this,” Bowles said, according to the Post. “We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can’t tax our way out. . . . The reality is we’ve got to do exactly what you all do every day as governors. We’ve got to cut spending or increase revenues or do some combination of that.”

O’Malley and the other governors have been seeking a second, smaller federal stimulus package to protect Medicaid and education funding that President Obama has been pushing but that Congress has been reluctant to grant in the face of the growing deficits.

O’Malley said Bowles and Simpson “also acknowledge we’re all trying to protect a fragile recovery. All of us are adding to unemployment rolls,” creating more demand for state services.

The governor was reluctant to say that the states were not likely to get more help from the federal government. He balanced the budget that began July 1 with the hope of receiving $389 million in additional Medicaid funding that Congress has yet to pass.

In the long term, “the big variable in this is what is the new rate of growth,” O’Malley said. “The very difficult balance at this point is to protect the fragile recovery and bringing down the long-term deficit.”