Feb 17, 2013 at 4:45 pm
The WaPo has another in a series of editorials warning against any complacency in our efforts to stabilize the debt.
WE DETECTED a whiff of complacency when President Obama declared, in the State of the Union address on Tuesday, that $2.5 trillion in 10-year budget savings achieved so far put the nation “more than halfway towards the goal of $4 trillion that economists say we need to stabilize our finances.” The president added: “We need to finish the job.”
Deficit reduction is still more urgent than these words imply, recent favorable trends notwithstanding. The U.S. might be able to get to the $4 trillion mark with relatively modest additional measures — but “the job” of truly stabilizing America’s long-term finances would still be anything but finished.
I disagree—here’s my view of the economics of the issue, which I think they have wrong—but I see where they’re coming from and agree that stabilizing the debt doesn’t mean your fiscal work is done, and for two reasons, it’s better to stabilize at lower than higher levels: 1) we’re less exposed to interest rates spikes at lower levels, and 2) we’re better positioned to add to the debt ratio when the next downturn hits; conversely, their “debt ratios above 90% are a drag on growth” is total bunk.
But there’s another very important reason why the WaPo’s view is both dangerous and naive right now: the current Congress simply can’t be trusted to achieve deficit savings in a way that’s compatible with either growth or smart governance.
There are too many policymakers today who are driven by deep ideological opposition to government to approach this in a thoughtful way. To the contrary, they’re heavily invested in staying in deficit-freak-out mode so as to slash and burn social insurance, to push balanced budget amendments that would both rob the federal government of counter-cyclical policy and force massive sequesters, and to argue for spending caps that have no reference to the nation’s needs going forward. Arguments like the one in the WaPo simply throw fuel on their fire.
What the Post is doing is analogous to promulgating that we are a nation in need of medical treatment at a time when the majority of the doctors are trained in medieval medicine, ready to apply their leeches to any government program they can get their hands on.
At such a time, with such dangerous, dysfunctional ideologues in power, we’re much better off with the modest goal of debt stabilization over the 10 year budget window (and, in fact, the spending cuts we’ve legislated already go too far in terms of supporting necessary investment functions in the discretionary budget), a point that is only amplified by the recent slowing of health care costs, as this too provides us with a bit more breathing room in terms of thoughtfully addressing future budget pressures.
It’s just not smart at all to foment emergency—especially when there is none—without a lot more thought about who’s on the squad that’s supposed to respond to the problems for which you’re ringing the alarm bells. A little strategic thinking could go a long way right now.
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