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Op-Ed

A Deficit of Political Will

Isabel V. Sawhill

The federal budget is in serious disrepair. Currently, deficits are hovering around $500 billion a year. And if the tax cuts enacted in 2001 and 2003 are made permanent, they will add about $5 trillion to the nation’s debt over the next decade.

Rhetoric aside, it is not clear that either presidential candidate is prepared to address this problem. Democrats labored long and hard during President Clinton’s two terms to reduce the deficits they inherited in the early 1990s.

But now that their surpluses have reverted to deficits, they may be loath to spend their political capital once more on such an unpopular task. Moreover, sopping up the red ink might require forsaking new investments in social programs and scaling back existing programs — not an appealing prospect to progressives.

Republicans, for their part, are hampered by a deep commitment to tax cuts and to the notion that trimming non-defense spending outside of Social Security and Medicare can solve the problem.

This is like saying that six minus one equals zero. The fiscal problem can’t be solved by reducing non-entitlement programs alone.

What to do? The solution can be found in four broad principles.

First, we can’t have guns and tax cuts at the same time. As Sen. John McCain, R-Ariz., noted in a recent speech, we have never before cut taxes in a time of war. Indeed, there is something immoral about asking only the young to sacrifice while people in comfortable circumstances are being rewarded with lower taxes.

After World War II, the nation’s veterans were afforded an opportunity to go to college, courtesy of the GI Bill. During the Vietnam War, President Lyndon Johnson proposed, and Congress enacted, a 10 percent surtax on all individual and corporate income. Something similar to that surtax, and a wartime moratorium on any further tax cuts, is needed for as long as it takes to produce a secure environment in Iraq and Afghanistan.

In fact, serious deficit reduction will require canceling not just tax cuts for the wealthy but also some of the cuts for the middle class. This is obvious to anyone who has looked at the numbers.

Second, we still need government investment at home. Reducing deficits is a means, not an end. Deficits are bad if they force the private sector to compete with government for a limited amount of saving, undermining productivity.

But productivity depends on more than fiscal frugality. It depends on the education and health of the work force, the efficiency of transportation and communication, and the functioning of public bureaucracies.

Indeed, the payoff from many private sector investments depends critically on the availability of all of the above, especially a well-educated work force. So failing to make these public investments will influence future productivity and standards of living every bit as much as failing to bring deficits under control.

Third, not all government programs are effective. In a recent Brookings book, Restoring Fiscal Sanity, the authors identified $175 billion in savings from cutting back everything from manned space flight to farm subsidies to ineffectual social programs.

Not every program that sounds good on paper achieves its well-meaning objectives. If the politics of making such choices is too tough, then a new president should work to establish the domestic equivalent of a base-closing commission — that is, an independent body that would recommend a series of cuts that would be decided by an up-and-down vote.

Along with such sensible budget rules as ”pay-as-you-go” financing for any new initiatives or tax cuts, this would help to restore some fiscal balance.

Finally, it is time to recognize that a dollar invested in the young is more likely to affect future productivity and the strength of the nation than a dollar provided to a senior citizen. Both parties, of late, have been unwilling to tamper in any serious way with Social Security or Medicare.

These programs have been a huge success, but the trade-offs have to be faced, especially in light of the looming retirement of the baby-boom generation. The federal government already is spending 7 percent of the national income on the elderly but only 2 percent on children. This disparity will grow exponentially over the coming decade.

Even now, a not-very-popular prescription drug benefit is costing us more than it would have cost to provide universal health care for children along with high-quality preschool and after-school programs for those who need them most.

The candidates understandably would prefer to side step these difficult issues in an election year. It’s a lot easier talking about a bright new day in America than about black clouds on the horizon.

So expect a lot of upbeat rhetoric unless the press and the responsible public can force the candidates to address the vital fiscal issues that confront the country. Americans deserve to know which man has the guts and vision to restore equilibrium to the government’s balance sheet.

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