One of the more important bits of analysis we’ve done lately here at CBPP is this piece by Richard Kogan on what more it would take, given tax increases and spending cuts legislated thus far, to stabilize the debt over the next decade.
The President himself underscored the punch line of the paper in his presser yesterday, noting that it would take about another $1.5 trillion in deficit reduction over the next 10 years to achieve the first goal of long term sustainability: a stable debt-to-GDP ratio. Richard’s analysis suggests it would take $1.4 trillion, which breaks down to $1.2 trillion in policy changes, which would save another $200 billion in interest payments.
Now, that stabilization would occur at 73% of GDP, a point I’ll get back to in a moment.
Coming up with $1.2 trillion in savings over ten years is no cake-walk, but if, as the President suggests, you split it between tax increases and spending cuts–$600 billion each—a functional Congress could do it, and could do it without whacking away at Social Security and Medicare (which isn’t to take them off the table) or getting wound up in major tax reform.
But predictably, what you’re seeing now—and expect a lot more of this—is a bunch of people moving the goalposts to re-light everyone’s hair on fire about the horrific budget crisis and how we’re all profligate Greeks who refuse to make the hard choices.
Some of them show up here, pointing out that they’re “incredibly worried” that the President’s proximate goal is too limited, or that it won’t provide the impetus for something called “structural reform,” or that a ten-year horizon is too short.
This is precisely the deficit hysteria that’s had DC policy makers distracted for years, busy setting fiscal traps and devising crackpot schemes like using the debt ceiling as leverage for spending cuts instead of paying attention to jobs, wages, and public investments.
That’s not to say that 73% debt/GDP is a venerable target or that we can ignore increasing budgetary pressures in future decades. But those pressures come mainly from health care costs, which have slowed considerably in recent years.
So the right move now is not to undermine our social insurance programs that are increasingly critical for the well being of economically vulnerable retrirees. It’s to plot a path that stops us from digging the debt hole any deeper—to stabilize the debt as a share of GDP and watch what happens to health costs. If the recent slowdown sticks, as some experts believe it will, we’ll have considerably more budget oxygen than current forecasts suggest. If not, it’s back to the health care reform drawing board.
We might even think about some near-term temporary measures that target the still-too-high unemployment rate (remember, the temporary stuff doesn’t hurt you on the deficit—it’s the permanent stuff that’s not paid for).
But to do that, we must clear our head of opportunistic hysterions who can’t take “yes” for an answer. We’ve actually made some “tough choices,” as they like to say. Let’s take a measured look at what more it would take to stabilize the debt, implement those additional savings in a balanced manner, and start thinking a lot more about getting this economy working for working people.