It's not our debt that's unsustainable, it's our politics
The Washington Post's online edition, February 17, 2010
As a debt worrywart who devoured one of Pete Peterson's doomsday books on my (first) honeymoon, and who came to Washington to help balance the budget in the 1990s, I take a back seat to no one when it comes to deficit hawkery. But the current panic over the national debt is a little mad. Yes, it's a fine thing that President Obama is naming Alan Simpson and Erskine Bowles to head up the fiscal commission he'll unveil Thursday. And Republican glee and Democratic fear over the political fallout from trillion-dollar deficits are understandable. But, at least for now, the policy consequences are modest and manageable.
How can I say that? Because even the most debilitating debt is racked up only one year at a time. And that means the staggering $9 trillion in fresh debt that President Obama has projected over the next decade is only a number on paper for the moment. If they came to pass, these levels of debt would be country-wrecking, next-generation-crushing and downright wrong. Is the president's forecast of such debt proof of the White House's unwillingness to lead on hard choices? You betcha. Does it mean we'll actually incur this debt? In a word, no.
The beginning of wisdom here is to remember that what "everyone knows" about the economy often turns out to be wrong. I was an aide in the room when respected economists on Bill Clinton's team told the president in 1994 (as has been reported elsewhere) that he couldn't possibly seek to balance the budget any faster than in seven to 10 years. Reducing government demand more swiftly might capsize the economy! Three years later, the budget was in surplus and the economy was humming. The moral: Always balance the advice of experts with the counsel of common sense.
Common sense today starts with the fact that the economy is recovering from the worst downturn in decades. With unemployment high, and business investment and consumer spending still lagging, government has to run big deficits to keep the recovery on track. Once we're on stabler ground, and seeing ample job growth again, deficits on this scale won't be justified. For now, as Obama rightly argued in a speech Wednesday marking the first anniversary of the stimulus bill, they're unavoidable—and indispensable.
The good news from the Clinton experience is that the chronicle of debt foretold in Obama's budget is perfectly consistent with a return to fiscal sanity much sooner. The bad news is that our bipartisan blend of fiscal dishonesty and political calculation has reached the point where it's hard to know who will spark the debate we need about the real choices America faces.
Republicans act as if near-term deficits are a bad thing, when in fact the flood of spending both from the stimulus and the Federal Reserve's creative liquidity injections brought the economy back from the brink. The new Republican "it" boy on fiscal policy, Rep. Paul Ryan of Wisconsin, indulges in the mathematical and political fantasy that we can keep taxes at their historic level of 19 percent of GDP while doubling the number of people on Social Security and Medicare .
Democrats, meanwhile, are boxed in by Obama's unsustainable pledge not to raise taxes on Americans earning less than $250,000—a policy that only "works" if we think we can borrow all the cash for the baby boomers' retirement from China. Nor will Democrats explain to their liberal base that trimming Social Security benefits for better-off retirees will be a progressive way to fund better teachers for poor children in the era of permanent fiscal pressure ahead.
It's such a surreal moment that admissions of cowardice somehow pass for evidence of fiscal rectitude. Whatever its merits—and let's all wish it well—the very need for Obama's new fiscal commission amounts to an extraordinary confession.
"We refuse to risk our hold on power," our leaders are essentially telling us, "by coming clean on our own about the tax increases and spending cuts we know are needed to pass a sound nation to our children." Thus "political leadership" becomes an oxymoron. Odds are we'll fix the budget once enough of us show our leaders it's safe to do what needs to be done; think Perot getting 20 percent of the vote in 1992. But the price of having to wait for good "followership" instead of real leadership is high. For now, this price includes the reality that neither major party has a political strategy that includes solving our biggest problems. And that, more than our rising debt, is scary.
The Washington Post's online edition, February 17, 2010
As a debt worrywart who devoured one of Pete Peterson's doomsday books on my (first) honeymoon, and who came to Washington to help balance the budget in the 1990s, I take a back seat to no one when it comes to deficit hawkery. But the current panic over the national debt is a little mad. Yes, it's a fine thing that President Obama is naming Alan Simpson and Erskine Bowles to head up the fiscal commission he'll unveil Thursday. And Republican glee and Democratic fear over the political fallout from trillion-dollar deficits are understandable. But, at least for now, the policy consequences are modest and manageable.
How can I say that? Because even the most debilitating debt is racked up only one year at a time. And that means the staggering $9 trillion in fresh debt that President Obama has projected over the next decade is only a number on paper for the moment. If they came to pass, these levels of debt would be country-wrecking, next-generation-crushing and downright wrong. Is the president's forecast of such debt proof of the White House's unwillingness to lead on hard choices? You betcha. Does it mean we'll actually incur this debt? In a word, no.
The beginning of wisdom here is to remember that what "everyone knows" about the economy often turns out to be wrong. I was an aide in the room when respected economists on Bill Clinton's team told the president in 1994 (as has been reported elsewhere) that he couldn't possibly seek to balance the budget any faster than in seven to 10 years. Reducing government demand more swiftly might capsize the economy! Three years later, the budget was in surplus and the economy was humming. The moral: Always balance the advice of experts with the counsel of common sense.
Common sense today starts with the fact that the economy is recovering from the worst downturn in decades. With unemployment high, and business investment and consumer spending still lagging, government has to run big deficits to keep the recovery on track. Once we're on stabler ground, and seeing ample job growth again, deficits on this scale won't be justified. For now, as Obama rightly argued in a speech Wednesday marking the first anniversary of the stimulus bill, they're unavoidable—and indispensable.
The good news from the Clinton experience is that the chronicle of debt foretold in Obama's budget is perfectly consistent with a return to fiscal sanity much sooner. The bad news is that our bipartisan blend of fiscal dishonesty and political calculation has reached the point where it's hard to know who will spark the debate we need about the real choices America faces.
Republicans act as if near-term deficits are a bad thing, when in fact the flood of spending both from the stimulus and the Federal Reserve's creative liquidity injections brought the economy back from the brink. The new Republican "it" boy on fiscal policy, Rep. Paul Ryan of Wisconsin, indulges in the mathematical and political fantasy that we can keep taxes at their historic level of 19 percent of GDP while doubling the number of people on Social Security and Medicare .
Democrats, meanwhile, are boxed in by Obama's unsustainable pledge not to raise taxes on Americans earning less than $250,000—a policy that only "works" if we think we can borrow all the cash for the baby boomers' retirement from China. Nor will Democrats explain to their liberal base that trimming Social Security benefits for better-off retirees will be a progressive way to fund better teachers for poor children in the era of permanent fiscal pressure ahead.
It's such a surreal moment that admissions of cowardice somehow pass for evidence of fiscal rectitude. Whatever its merits—and let's all wish it well—the very need for Obama's new fiscal commission amounts to an extraordinary confession.
"We refuse to risk our hold on power," our leaders are essentially telling us, "by coming clean on our own about the tax increases and spending cuts we know are needed to pass a sound nation to our children." Thus "political leadership" becomes an oxymoron. Odds are we'll fix the budget once enough of us show our leaders it's safe to do what needs to be done; think Perot getting 20 percent of the vote in 1992. But the price of having to wait for good "followership" instead of real leadership is high. For now, this price includes the reality that neither major party has a political strategy that includes solving our biggest problems. And that, more than our rising debt, is scary.