President Obama’s budget proposal takes some important first steps to address the challenge of surging federal deficits and debt, but we’ll need to do a lot more if we want to actually solve the problem.
Yes, the president’s budget would reduce deficits to around 3 percent of the economy for most of this decade, essentially stabilizing the debt as a share of the economy over that period.
But, that would provide just a temporary reprieve from rising deficits and debt that would return in full force later on. That’s because the budget largely avoids the main factors behind longer-term deficits: soaring healthcare costs and the aging of the population, which will greatly increase spending on Medicare, Medicaid and Social Security. Revenues will not come close to offsetting those costs.
Medicare, Medicaid, Social Security and interest on our debt not only will drive longer-term deficits and debt, they eventually will squeeze out spending for everything else — from defense to homeland security, education to research, law enforcement to food safety. That will leave the government without the funds to protect the nation, address critical needs and respond to national emergencies.
This challenge is far more than an issue of dollars and cents. We will address it, or we will face a future of less savings and investment, lower living standards and less U.S. leadership around the world. We cannot remain the world’s leading economic, military and political power while generating larger deficits and debt without end.
It is not exaggeration to say, as economic historian Niall Ferguson has warned, that America’s national debt is reaching catastrophic levels.
The president must lead. He must make clear, to both Congress and the public, that the United States faces a problem that could turn our great nation into a second-rate power. No one else can lead the charge.
The president could have done what two fiscal commissions did recently — craft a plan to address the problem head-on.
Together, we co-chaired a bipartisan,?19-member task force of former federal, state and local leaders for the Bipartisan Policy Center (BPC), developing a plan to reduce deficits to manageable levels, balance the “primary budget” (everything but interest payments) by 2014 and stabilize the debt below 60 percent of the economy over the long term. We simplified the tax code for individuals and businesses while raising more revenue through a new 6.5 percent national sales tax; reformed Medicare and Medicaid to control healthcare costs; reformed Social Security so it can pay benefits for the next 75 years; found other entitlement savings; and froze defense and domestic discretionary spending for several years.
One of us (Alice Rivlin) also served on Obama’s National Commission on Fiscal Responsibility and Reform, which crafted a bipartisan plan to reduce deficits and stabilize the debt that received support from 11 of its18 members. Similar to the BPC panel’s plan, it would simplify taxes; reform Medicare, Medicaid, and Social Security; find savings in other entitlement programs; and freeze (and then cut) defense and domestic discretionary programs.
The nation’s leaders need to follow the example of the two fiscal commissions and address the challenge as soon as possible. That will reduce the risk of an economic crisis, strengthen the economy over the long run and ensure that America continues to play a leadership role on the world stage.
We recognize that, had the president proposed in his budget the kinds of unpopular steps that would address the longer-term problems, he would have faced almost certain partisan political attack. That, in turn, actually could have set back efforts to develop bipartisan solutions to the problem at hand.
The best hope for progress lies in the bipartisan discussions that are already occurring in Congress. Sens. Kent Conrad (D-N.D.), Tom Coburn (R-Okla.), Mike Crapo (R-Ind.), and Dick Durbin (D-Ill.) were all members of the president’s fiscal commission who signed the proposal. Sens. Mark Warner (D-Va.) and Saxby Chambliss (R-Ga.) have formed a bipartisan group working together on a debt-reduction plan that reportedly includes more than 30 senators.
We encourage the president and congressional leaders of both parties to turn those discussions into a broader bipartisan proposal for longer-run deficit reduction, including fundamental tax and entitlement reform.
The sooner we can get to that stage, which holds the promise of repeating the success of bipartisan deficit-cutting negotiations of the 1980s and 1990s, the better.