By Jeanne Sahadi @CNNMoney July 27, 2011: 1:06 PM ET
NEW YORK (CNNMoney) -- With all the Washington dysfunction over the debt ceiling, it's easy to forget the reality of the debt problems everyone says they want to fix.
Here's what's at stake: An entitlement system that Americans rely on but that promises more than it can afford; a tax code that is complex, inefficient and perceived to be unfair; and a projected growth trajectory for debt that is unsustainable and threatens the country's economic future.
How unsustainable? By 2025, spending on Medicare, Medicaid, Social Security and interest on the debt is projected to suck up virtually all federal tax revenue, with interest costs alone accounting for nearly half. By 2040, there would only be enough in federal tax revenue to pay for interest and most of Social Security.
So what have all the political fireworks in Washington accomplished so far? Not much.
It's likely the debt ceiling will be increased, although when and by how much is still very much up in the air.
It's also expected that any debt ceiling bill will cut spending. But the deficit savings will fall short of the balanced, bipartisan grand bargain that serious fiscal experts say is necessary to start reining in the country's debt over time.
Any grand bargain package would have to include increased revenue and lower entitlement spending, they say. The current bills under consideration include neither.
The kicker: All of the political grandstanding on the debt ceiling in the name of debt reduction has left the country's AAA credit rating vulnerable to a downgrade.
Way to go, Congress.
How did it come to this? There are a lot of factors, but here are just two:
While President Obama now embraces the idea of a grand bargain, he waited months to publicly embrace the framework set out by his own bipartisan debt commission. Nor did he use his bully pulpit early enough to get a rational conversation about debt reduction going.
House Speaker John Boehner, meanwhile, was negotiating a big debt-reduction plan with the president. But his party has also walked away from negotiations three times. And the most conservative and intransigent members of his party -- who broker no compromise on taxes -- have dominated the conversation.
Still, perhaps not all is lost.
Read the rest: http://money.cnn.com/2011/07/27/news...ss_igoogle_cnn