“I Want a Crisis, Damn It! Get Me a Crisis!! Now!!!”

January 15th, 2013 at 10:34 pm

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.

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8 comments in reply to "“I Want a Crisis, Damn It! Get Me a Crisis!! Now!!!”"

  1. Nhon Tran says:

    Thank you.
    An article in the latest Foreign Affairs magazine says that the American government welfare system is not targetted to people of low means/income, as it should, and that better targetting can help more poor people at a lower total cost. According to this paper, only 7% of public welfare spending in the US is subject to a means test, compared with a third in Australia and a quarter in Canada and the UK.

    • Fred Donaldson says:

      Australia doesn’t have to do a lot of welfare payments.

      They have a deal, for example, where tuition is about $4,500 a semester, for anyone, and if you need to borrow money on a student loan there is NO interest charged, and if don’t have a decent job, you don’t have to make payments.

      The biggest reason for little welfare is their fair wages – a $15+ minimum wage puts most folks over any poverty line – there or here.

  2. jo6pac says:

    Well that last sentence sounds good to me but my money is on demodogs/repugs and the potus all going the way of Austerity. This will be the winner for then potus can say they made me do it and the loser will be us on Main Street.
    I’m wondering why you keep including SS as something that shouldn’t be taken off the table? If the govt. doubled SS payments to retirees this might be enough to get people to retire since most saw their 401s wiped out in 08. Then raise by a dollar to the employee pay in and raise corp. pay in 10 fold to SS, then take off the cap. Then close all corp. loop holes and if they don’t like it then they can sale their products in another nation. I think just for good measure remove all the cycle-0-paths from corp. and govt. that would be fun.
    Then Medi-Care/ Medi-Cad become single program free to all in this nation and corp. health care welfare is removed from the equation.
    None of the above will happen because we/corp. as a nation are too busy trying to control the resources of other nations for our own corp. greed. Then in the case of ws and dod vendors no one ever goes to Jail for their crimes so there is no reason for us on Main Street to help them knox down the middle class. I just love the idea that we little people have to take the hit and the wealth of the nation gets a pass once again. I’m just thankful there’s a democrat in the wh;)

    Govt. like corp. is only interested in short term and we use to be a nation that did big things and now the only big thing we do is WAR and what is good for?

  3. jo6pac says:

    Sorry I forgot to add this for us Blue Collar.


    Bruce pretty much cover this down grading of the workers of this nation.

    Thanks Jared and good luck.

  4. tom canavan says:

    Is this what you are looking for? TheJobsMandate.org ?

  5. urban legend says:

    “So the right move now is not to undermine our social insurance programs that are increasingly critical for the well being of economically vulnerable retirees.”

    Totally agree, but does this mean, as it should, you are renouncing your previous untenable position that Social Security benefits should be calculated from Chained-CPI? Should we assume you now concede that there really is no evidence that C-CPI-U is “more accurate” than the official CPI-U, and that if the official CPI-U had been overstated by three percentage points every over the past 20, 30 or 40 years, the current figure would be so out of whack as to be completely useless.

    When BLS adopts C-CPI-U as its central figure backed by an entire apparatus of data collection and analysis — when it becomes the “CPI-U” with its Social Security-dedicated companion figure, CPI-W — then it will make sense to talk about using it (or one more like the CPI-E). Until then, it’s nothing more than a reduction of benefits for middle class and lower-income retirees, and advocating for it is completely inconsistent with the statement above.

    • urban legend says:

      Excuse me: 0.3 percentage points every year (or 3 percentage points every ten years, 6% every 20 years, 9% every 30 years. Cost of living growth would have been exaggerated by almost 15% since the 1967 base year. Does anyone honestly think that’s the case? Of course not. It’s the CPI, to which the BLS devotes virtually all its resources to make as valid as possible, that is the more accurate figure.

  6. Jill SH says:

    Shall we coin a new word? Austeria. People who practice austeria are called austerions. They’re the ones who move the goalposts and light everyone’s hair on fire. (Love the mixed metaphors.)