Disconnect between campaign and country's fiscal challenges

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One might think the presidential campaign would be the ideal time for a serious discussion about how to address the mounting debt. The two tickets feature the two politicians – President Obama and U.S. House Budget Committee Chairman Paul Ryan – who have been the chief architects of dueling budgetary visions for their respective parties.  Both have done a creditable job of describing the problem. But what do we know about what they would do about it? Not as much as we might think, or that would really permit an informed choice between two visions for the scope of the federal government.
 
Given the magnitude of the budget cuts and policy changes that will be required to make a significant reduction in the debt, the public deserves a detailed debate about the two visions of the scope of the federal government. But so far, this hasn’t happened.
 
The Obama fiscal year 2013 budget doesn’t solve the problem, or even come close. In fact, it would result in a $9 trillion increase in the national debt, bringing it to almost $19 trillion by 2022. This is less than the debt increase that would happen under current policies, but not nearly as bold as the recommendations of Obama’s own National Commission on Fiscal Responsibility and Reform, which recommended increased taxes on more Americans and greater spending cuts, including entitlement reform. The president’s budget, conversely, only increases taxes on wealthy Americans, with only modest spending reductions. With respect to the debt, the president’s budget slows the bleeding but neither stops it nor does much to heal the patient.
 
What of the Ryan budget plan? The Ryan budget goes further than the president’s budget during the same time-frame. By 2022, the debt under the Ryan plan would represent $15 trillion, $5 trillion higher than under current policies but $4 trillion lower than in the president’s budget. The Ryan plan does two things, however, that the president’s budget does not. First, it lowers the debt as a percentage of GDP from current levels. Second, it balances the budget – 25 years from now.  It is probable, to be fair, that the President’s budget proposals would never balance the budget, but we don’t know that because they don’t extend as far.
 
By 2040, when the Ryan budget would be balanced, his proposal would cut debt to 38 percent of GDP, or just over half of where it is now.  If we were, then, to judge the two plans based on how fast and how far the debt is being reduced on paper, the Ryan plan is a clear winner. The Ryan plan puts the budget on a path to sustainability, even if it takes a long time to get there.
 
The problem with the Ryan plan is that while it is bold, it is wholly unrealistic. It embraces changes to Medicare and Medicaid that, however one views their desirability, will save lots of money. But after that, the math gets more difficult.  In its effort to leave Social Security alone and its adherence to anti-tax orthodoxy, the Ryan budget squeezes everything else – including defense – to the point where the proposal loses credibility.
 
Because Ryan offers no specifics about how those reductions would be realized, the cuts appear more realistic and less threatening than they will likely be. Reductions of the magnitude required by the Ryan proposal would put us in uncharted waters, and would require the federal government to stop doing lots of things that it does now.
 
Consider that if we eliminated the departments of Commerce, Energy, and Education, as well as the Environmental Protection Agency, we would still be just halfway there by 2023, and only a fourth of the way there by 2040. There are lots of ways that this gap could be closed, but all of them involve big cuts to programs such as veterans’ benefits, law enforcement, homeland security, unemployment insurance, and the like. While this is possible, Ryan doesn’t specify what he would cut, and regardless, such cuts would be extremely difficult to enact politically.
 
In the end, then, the voters are faced with a choice between the president’s proposal, which doesn’t do much to solve the deficit problem, and Ryan’s, which arguably does a lot but seems very unlikely to be able to deliver on its promise. While the public deserves an informed debate about the merits of both, only a real optimist would think that we are about to be treated to one. Instead, we should prepare for more dueling charges and promises not to take various actions – which will only make the problem harder to solve for the victorious candidate.

Joyce is professor of Management, Finance and Leadership at the University of Maryland School of Public Policy