When it comes to federal spending, America faces a dilemma that St. Augustine might have appreciated.
It was the young Augustine who prayed that God would make him chaste, only not now. Likewise, Washington must rein in its galloping deficits and debt, but not now — not when nearly 10 percent of Americans are jobless, long-term unemployment has reached new highs, and many have stopped looking for work altogether.
This isn’t the moment to impose fiscal austerity. But, as a group of smart Senate Democrats insist, it’s not too soon to start laying the groundwork for a return to fiscal responsibility once the economy recovers. Otherwise, our mountainous public debts will drain capital from the private economy and quite possibly scare off the foreign lenders who are keeping the U.S. economy afloat.
The Hill reports today that nine Senate Democrats and Independent Joe Lieberman (CT) have sent Majority Leader Harry Reid a letter urging him to set up a special legislative process to defuse the debt bomb. “We do not believe that action on these important issues will occur under the regular order in Congress,” they wrote.
The Senators, including such pragmatic progressives as Evan Bayh (IN), Mark Warner (VA), and Mark Udall (CO), are dead right. The key to getting Washington’s finances under control is curbing the unsustainable spending growth of Medicare, Medicaid, and Social Security. As entitlements, these programs grow automatically each year, propelled by medical cost inflation and the baby boom retirement. This happens by formula, outside of the normal Congressional budgeting and appropriations processes.
It’s instructive that the last serious effort at entitlement reform came in 1983, when President Ronald Reagan and House Speaker Tip O’Neill agreed to create a special panel (chaired by Alan Greenspan) to fix Social Security. They understood that lawmakers are unlikely to tackle the politically explosive issue of entitlement reform without both parties having skin in the game.
Other forward-looking Democrats, such as Sen. Kent Conrad (ND) and Rep. Jim Cooper (TN), have proposed a bipartisan commission to identify the spending and tax changes necessary to start winding down the nation’s deficits over time. The Obama administration would be wise to embrace this approach. It would be seen by investors here and abroad as a kind of promissory note, a sign that U.S. political leaders are determined to deleverage the federal government and boost national savings.
Some liberals dismiss worry about deficits (which reached an astronomical $1.4 trillion this year, up from $455 billion in 2008). They say Democrats ought to focus on creating jobs and speeding economic recovery, which means more government spending. It’s a false choice. Maybe we need to spend more — we’ll have a better idea once the original stimulus package is spent.
Even so, the U.S. cannot afford to let its national debt rise to 80 or even 100 percent of national output, as some budget experts predict. We can’t build lasting prosperity on fiscal quicksand.
So it’s not a matter of choosing between more Keynsian stimulus and deficit reduction, it’s a matter of doing both — and getting the sequence right. As the Senate pragmatists recognize, that means starting now on the difficult work of building a broad political consensus for modernizing the big three entitlements.
