National view: Politicians must provide answers to deficit problems

Talk about it

With the federal government running annual deficits in excess of $1 trillion, voters must demand realistic solutions from the candidates. However we choose to do it, we need to balance spending and revenue.

This will require some tough choices. Our aging nation is undergoing an unprecedented demographic transformation and a permanent rise in the cost of programs such as Social Security, Medicare and Medicaid. Moreover, special tax breaks alone now cost in excess of $1 trillion per year in lost revenue.

There is no plan to pay for this other than running up the national debt. Some say our political system only responds to a crisis. Doing nothing now, however, would be an act of fiscal and generational irresponsibility. Without constructive action soon, our leaders will get their crisis and all Americans will pay.

One viable prescription for a “grand bargain” on deficit reduction rests on a fundamental compromise: Democrats agree to a structural change in Medicare that will reduce projected spending and Republicans agree that a portion of new revenue from economically efficient tax reforms can go to deficit reduction.

Success, both politically and economically, will require both spending cuts and new revenue. The problem is too big to be solved with ideological purity. That was the guiding premise behind the well-respected report by Alan Simpson and Erskine Bowles, co-chairmen of the National Commission on Fiscal Responsibility and Reform in 2010. This also was the conclusion of the CEOs of 80 big-name companies who recently released a statement calling for both spending cuts and increased revenue from tax reform.

So far, both presidential campaigns have missed the mark.

President Obama’s budget relies on both spending cuts and tax increases to bring the deficit down. In that sense, everything is on the table. The Obama budget stops short, however, of the structural changes needed to keep the debt from rising to more unsustainable levels. After 10 years, the debt would actually be higher relative to the size of the economy.

The Ryan plan that Mitt Romney supports claims to reduce the debt faster than Obama. But Ryan’s plan resorts to implausible assumptions to get there. Spending on everything other than Social Security, Medicare, Medicaid and defense would virtually disappear in the coming years — as would many popular tax breaks that are defended by powerful Republican constituencies. For all this pain, the Ryan/Romney budget doesn’t get back to balance until 2040. This budget inadvertently demonstrates how unlikely it is that an exclusive focus on spending cuts can get the federal budget back on a sustainable track.

During this campaign, my Concord Coalition offered on our webpage “Key Questions Voters Should Ask Candidates about Our Nation’s Fiscal Future.” They included the following five straightforward questions: