A deadly serious problem, yet again, still, once more
January 31, 2011
Four perspectives on the our fiscal situation.
Excellent column by Robert J. Samuelson, "How Obama's speech muddied the budget debate". After concisely dispatching three myths--"The problem is the deficit," "Eliminating wasteful or ineffective programs will close deficits," and "The elderly have 'earned' their Social Security and Medicare by their lifelong payroll taxes, which were put aside for their retirement"--Samuelson concludes as follows:
It's a cliche, but true: There are no easy - or popular - solutions. Controlling the budget requires some combination of (a) reducing benefits for the elderly; (b) downsizing other programs, including defense; and (c) raising taxes. Not only did Obama avoid choices, but he failed to frame the debate in a way that clarified what the choices are. So public opinion remains muddled, and politicians - sensitive to public opinion - remain stalemated.
Obama's expedient evasion is the opposite of presidential leadership. It maximizes short-term approval ratings while running long-term risks. A loss of investor confidence could trigger a chaotic flight from Treasury bonds and the dollar. One economist recently wrote in the Financial Times: "I hope it does not ultimately require a crisis to restore fiscal [responsibility] . . ., but I fear it will." That was Peter Orszag, Obama's first budget chief. Sobering.
Not as good, and with parts I disagree with significantly, but worthwhile for indicating that even non-conservative columnists understand there's a problem, is William Galston, writing in The New Republic: "Dangerous Game: The latest budget numbers look bad. But the truth is even worse."
Here’s why the headlines understate the gravity of our situation. CBO is required to use current law as the basis for its estimates—to assume, for example, that all the Bush tax cuts will expire at the end of 2012, that Medicare payments to physicians will be cut sharply, and that the alternative minimum tax will be allowed to affect millions more Americans. Using these assumptions, taxes as a share of GDP would by allowed to increase by five percentage points by 2014 and would keep on rising thereafter, we’d have a cumulative deficit of about $7 trillion dollars over the next decade, and debt held by the public would increase from 62 percent to 77 percent of GDP. Using more politically realistic assumptions, the cumulative deficit would be about $12 trillion, and debt held by the public would reach 97 percent of GDP, the highest level since 1946 (when it was headed down, not up).
Mickey Kaus, "Letting Obama Off the Hook":
Why can't it be done? Largely because of opposition in his own party. Even if Obama ultimately failed at, say, promoting a gradual increase in the Social Security retirement age, or means-testing benefits—or simply explaining that actually we really will need to get more revenue from somewhere to pay for universal health care—he could help educate Democrats and soften them up for what will probably be a necessity coming down the road. That would be a patriotic service even if he's not the person down the road who cuts the deal. But it might cost him some 2012 votes—especially since, by explaining the need to fund health care, he'd embarrassingly undercut the bogus sales pitch Democrats just made when they pretended passing the health care bill was a painless long-term "curve-bender."
Finally, here's Governor Chris Christie talking, talking as well as any politician in my adult lifetime. Talk, sadly, is not action. But if our political system acted half as well as he talks, we could solve the problem.