The good news: Both parties finally agree on an important element of public policy.
The bad news: What they agree on is doing nothing real about the deficit.
True, the country is still staggering from the hammer blows of a severe recession. With unemployment at 10.2 percent, the administration’s first moral ó and political ó priority should be kick-starting the economy and creating jobs.
But that’s in the short run. In the long run, deficits matter. A lot. And the numbers are truly shocking. The budget shortfall reached $1.4 trillion in the fiscal year ending Sept. 30, by far the largest in history. The Congressional Budget Office estimates the national debt will snowball by a total of $9.1 trillion over the next decade.
Listen to Laura Tyson, former economic adviser to Bill Clinton, writing in BusinessWeek: “Persistent deficits of this size will put upward pressure on long-term interest rates, crowding out investment and stunting long-term growth.”
Interest payments will continue to grow, she warns, rivaling defense expenditures by 2019; investor anxiety could rise, the dollar’s value could fall, and another global crisis could explode.
Neither party is taking these warnings seriously enough. Republicans have decided to oppose all revenue increases, period. That’s not economic policy, that’s theological dogma, and not a good basis for compromise.
Democrats are determined to push through a healthcare bill costing about $1 trillion. And while President Obama insists he will never sign a measure that adds to the deficit, there is scant reason to believe him. The bills emerging from both houses are filled with gimmicks that save money on paper, but not in reality.
This dismal situation has led Democratic Sen. Evan Bayh of Indiana, one of the few sincere deficit hawks on Capitol Hill, to propose an independent commission that would take the hard decisions about taxing and spending out of Congress’ hands. As he told the New York Times: “The Democratic Party wants to spend more than we can afford; the Republican Party tends to want to cut taxes more than we can afford. So we are stuck.”
Stuck, indeed. Republicans talk a good game about “fiscal responsibility,” but when they ran the Congress they looted the federal treasury, shoveling out money to favored contributors and corporations so fast that several GOP lawmakers landed in jail and a bunch of others barely escaped indictment. .
The Democrats are hardly better. Look at the subterfuges contained in their healthcare bills. Under current law, doctors are due for a $250 billion reduction in their Medicare payments. Congressional leaders want to void that cut, and keep the American Medical Association happy, but they don’t want be honest about the cost.
So they put that $250 billion item into a separate piece of legislation. That way, it doesn’t contribute to the cost of the healthcare-reform bill. So it doesn’t count against Obama’s pledge to sign a deficit-neutral bill. But it’s just a shell game.
Democrats say a big chunk of the financing for their $1 trillion plan will come from reductions in Medicare payments. But they have already demonstrated that they don’t have the stomach for actually making such cuts.
As for revenue sources, the Democrats are equally weak-kneed, especially when it comes to opposing their own special friends. Unions are battling any attempt to tax so-called “Cadillac” insurance plans, even though economists agree that’s the best way to finance health reform.Democrats are happy to extend health-insurance coverage, a virtuous idea, but they won’t pay for their proposals.
Lawmakers have proved repeatedly that they lack the will and courage to impose fiscal discipline on themselves.
If you think that discipline doesn’t matter, here’s a freshman senator speaking in 2006, the last time Congress faced a vote boosting the government’s borrowing capacity: “Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”
The speaker was Barack Obama.
ó Newspaper Enterprise Association