NYT on the Deficit

The lead editorial from today's New York Times on the deficit injects some realism into recent discussion on the subject.

There is a lot of heated talk in Washington these days about the deficit, unfortunately little of it serious. Playing on Americans’ deep anxiety about the economy, Republican politicians have seized the deficit issue as their own — eagerly blaming the stimulus and even an extension of unemployment insurance for the problem — while denying their own culpability for helping dig this deep hole with years of irresponsible tax cuts. The Democrats in Congress have all but ceded the debate. The White House has pushed back some, but as the polls make clear, not nearly hard enough.

We agree the situation is unsustainable. But cutting spending right now on relief and recovery efforts would worsen the economic slowdown and the suffering of millions of Americans, while making only a tiny dent in future deficits. Spending on the biggest items in the budget (Medicare, Medicaid and Social Security make up about 40 percent) cannot be quickly cut back without unraveling the programs and inflicting deep and needless hardship on their beneficiaries. In the longer term, starting around middecade, Washington will have to begin wrestling the costs of these programs down, or the country will face an even bigger deficit crisis.

When it comes to controlling the near-term problem — trillion-dollar deficits every year for the next 10 years — the biggest help will be a return to solid economic growth and, with that, increasing tax revenues. Growth will not be enough. There is no chance to put the budget on a sustainable path without significant tax increases, and not just on the wealthy. Few politicians, of either party, are willing to tell that truth.

The Times makes the following specific points:

1. With two big tax cuts, two off-budget wars and an unfunded senior drug benefit, the Bush administration turned a budget surplus into a big deficit. The financial crisis of 2008 made things worse.
2. Most of the plausible ideas for reining in costs of Medicare and Medicaid are included in the recently passed health care reform package. These elements of the bill were the main reasons it got such strong support from experts in the health care field. The President and Congress must keep pushing for these to take effect and create savings. Social Security will require modest benefit cuts and tax increases phased in over a period of years.
3. Defense spending accounts for another 20% of the budget and cuts must be made there.

The editorial concludes:

When the deficit-reduction committee issues its report in December, we hope it will explain the tough truths about the causes of the deficit and the painful choices that will have to be made. President Obama cannot wait until then. In the fall campaign, there will be even more disinformation and demagoguing about the deficit. He needs to frame the debate. That means saying what the Republicans will not: there is no way to fix the nation’s fiscal crisis without higher taxes now and in the future — and cuts in entitlement programs down the road.

--Ballard Burgher