OVER AT THE DAILY BEAST, MEGAN MCCARDLE notices how fickle budgetary projections can be. The CBO (Congressional Budget Office) has published its Budget and Economic Outlook for 2013, and its outlook calls for federal debt to be between 75% and 80% of GDP through about 2020. This differs from its previous projections for similar time periods, which range from 40% to 50% (for 2009), 65% or so (for 2010), 75% or so (for 2011), and 60% to 75% (for 2012).
This year's projections are substantially worse than last year's--and much, much worse than 2009 and 2010. That's not because the CBO are bad forecasters; it's because the economy keeps not recovering as expected, and because Congress keeps changing the law to make it more expensive. By law and custom, the CBO is required to make unrealistic assumptions that "current law" will continue, such as assuming that Congress will allow the doc fix to expire and slash Medicare reimbursements to doctors by 30%. So some of this was always baked in.
In the "fiscal cliff" deal, Congress made a lot of stuff permanent. Some of that was acknowledging the inevitable, like fixing the alternative minimum tax. Some of it was unnecessary giveaways, like making the Bush tax cuts permanent for most brackets. Either way, we're now looking at a more expensive government.(Megan McCardle, The Daily Beast, A History of Budget Projections in 13 Charts, Feb. 05, 2013.)
Sure, CBO forecasts may be required to incorporate various assumptions that may not be correct. Sure, the CBO doesn't have control over the economy's recovery. Sure, the CBO can't control legislation that may invalidate the assumptions underlying its forecasts. Shifts in estimates of debt-to-GDP probably occur for many good reasons. But surely such shifts also suggest the dangers in relying upon forecasts for budgeting purposes.
In the course of resolving our long-term debt problem, the Solvency Amendment wouldn't concern itself with forecasts or assumptions or guesses about revenues. Instead, the Amendment would look to the revenues that actually come in as a result of our tax policies and our regulatory policies. By relying upon actual revenues instead of ephemeral estimates, the Amendment will concentrate our attention not just on the spending side of our policies, but on the revenue side as well.
CITING THE SAME CBO REPORT, The Washington Post says that it is time for President Obama and Congress to "chip away" at our deficits.
. . . In its latest report on the nation’s fiscal health, the nonpartisan office reported that deficits will decline through 2015. But an aging population and rising health care and interest costs will propel the national debt higher soon thereafter, to 77 percent of the economy by 2023 — and rising. This would have “serious negative consequences,” the office noted — which is putting it mildly, and yet another reason for Mr. Obama to take the lead.(Editorial Board, The Washington Post, Time For Congress, Mr. Obama to ‘Chip Away’ at the Deficit, Feb. 05, 2013.) Bad numbers, indeed. So: time for our elected officials to get on the case and save our bacon!
Wouldn't it be grand if only our elected officials could set aside their petty partisan ways (meaning, primarily, the despicable partisan ways of those jerks on the other side of the aisle). Our leaders could then lead us onward and upward to the sunny uplands of our future. We could be led to such goodness, if only our leaders could just find it in themselves to lead us properly.
This sentiment, or something like it, seems to be a silent assumption in most of our budgetary politics. But isn't there something at least a little bit--uninspiring?--about this sort of world-view? Here, in the 21st century, in this great free country of ours, we're dependent upon the wisdom, foresight, and inspiration of those lucky few who survive our system of electoral politics to guide us into the light? And if these few happen to let us down--then what? Them's the breaks, the world's a tough place, we hope the debt doesn't hobble the country too badly?
We do not have to settle for this. Free citizens of a free country do not have to settle for this. Under the Solvency Amendment, we would have balanced budgets by default regardless of the quality or capabilities of our leaders. We wouldn't need to worry that they couldn't figure things out, because the Amendment would do the heavy lifting for them. While our politicians would be free (and even empowered) to seek out better ways to balance our budgets, we would have at least a balanced budget to fall back on one way or another, in case no other better manner can be found.
MEANWHILE, IN WASHINGTON D.C., we have another round of dueling banjoes, with the back-and-forth of the moment being over the impending sequester.
The president said the economy, which unexpectedly contracted at the end of last year, had begun to recover slowly. But he warned that continuing fights over taxes and spending threaten to delay or derail that improvement.
“We’ve also seen the effects that political dysfunction can have,” Mr. Obama said. “We’ve made progress. And I still believe we can finish the job with a balanced mix of spending cuts and more tax reform.”
Senator Mitch McConnell of Kentucky, the Republican leader, mocked the president’s demands to close tax loopholes, calling them “gimmicky tax hikes” and said, “It’s time for Washington Democrats to get real.” House Republicans noted that they had already passed their own plans to avoid the sequester.
(Michael D. Shear & Jackie Calmes, The New York Times, Obama Urges Congress to Act to Stave Off Cuts, Feb. 05, 2013.)With the deadline looming, each party is eager to blame the other for consequences that could include thousands of layoffs at military contractors, service reductions in programs for the needy and a new economic slump.
And once they've finished dueling over the sequester, we'll get another debt-ceiling duel--and an endless string to follow, assuming the debt-ceiling mechanism is not abolished. Then, dueling over the next budget... and the next...
We can be confident that our string of emergencies--and banjo duels--will continue. At this point, though, we don't have much basis to be confident that the dueling banjoes will lead to any real solution to our long-term debt problem.
FINALLY, A REMINDER that our current process for resolving budgetary matters is truly inadequate to the task of solving our debt problem.
Even if fiscal calamity is distant, our debt accumulation poses a serious, if more subtle, cost: the financial burden it places on American families. To service the interest on America's $11.6 trillion of net debt, either taxes must be higher or spending must be lower than they would otherwise be.
To spare future Americans from this burden, we should begin to act now, adopting deficit-reduction measures that can begin to take effect as the economic recovery takes hold.
Some economists disagree, claiming that we should borrow more now because debt is "cheap" at today's low interest rates. Drawing a parallel to Japan, they claim that additional spending is the right prescription to get the economy back on track.
This argument ignores the likelihood that interest rates will slowly increase, and the possibility that they spike at some future date. Our political system, addicted to spending and low taxes, could not just stop borrowing the moment that happens.(Aspen Gorry & Matthew Jensen, RealClearMarkets, Deficits Are Costly, Even If You're Not Greece, Feb. 06, 2013; emphasis added.) Yes, it does sound unrealistic to expect our elected officials to act differently than they have up to now. On the other hand, this doesn't seem that much more realistic:
Because our national conversation has defined success as stabilizing debt as a percentage of GDP, rather than paying it off, the debt we have today and the debt we accumulate tomorrow will likely impose these costs on every generation of Americans. Forever.
We can and should ease this burden on future generations by moving to a path on which the debt grows more slowly than the economy-not just for the next ten years, but for the next 100. Of course, the price of doing so would be that our generation must face a burden higher than these numbers suggest.(Emphasis added.) How can we count on a hundred years of consistent fiscal policy if we can't even muster two years (or four years, or six years) for our current elected officials?
Fortunately, there is a way for us to naturally slide into fiscal responsibility, and stay there perpetually...
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