Deficit/debt hawks circling ... aimlessly

Now that the economy has begun to recover, the deficit- and debt-hawks are gearing up for a full blitz to reduce federal spending. Their doggedness would be admirable if it did not affect their rationality. Yesterday, the Peterson-Pew Commission on Budget Reform released a report, which set goals for reducing the debt-to-GDP ratio. The report does not list any policy specifics, only that, according to Douglas Holtz-Eakin, “Everything is on the table.” Incontinently, fellow commissioner Jim Nussle ruled out a VAT tax several moments later. Budget hawks love to tout their moderation and bipartisanship, but rumors of their unanimity have been greatly exaggerated.

The deficit crowd does not want to deal with other specifics of the debt — namely, inadequate revenue generation, military spending and Medicare. What they really want is Congress to appoint a commission, like the one proposed by Sens. Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.) last week, with power to cut entitlements.

However, it is foolish to believe the United States’ structural deficit is a singular issue requiring a singular fix. If the debt is a related to a single issue, it is rising healthcare spending and the current fee-for-service structure of Medicare that are to blame. Yet at a time when healthcare reform hangs in the balance in the Senate, the commission members seemed to treat it as an incidental matter. You would think that the commission would spend its time proposing how to bend the cost curve of the House and Senate health bills.

Social Security, Medicare and Medicaid are often grouped together as a trifecta of debt-inducing programs, but they do not contribute equally to the federal deficit. An astute House Budget Committee staffer told me that you could add her mortgage to Medicare alone and the U.S. debt would appear to be unsustainable, but that does not mean her mortgage is the cause of U.S. debt. Social Security is still running a surplus (yes, a surplus). In fact, according to the last Social Security trustees’ report, Social Security will continue to run a surplus until 2023 and will build its reserves to $4.3 trillion. Social Security demagoguery obfuscates the strength of the program in providing earned economic security for workers and retirees, in addition to lifting millions of children and seniors out of poverty.

Rising debt is a problem for the United States, particularly if the interest paid on debt starts to crowd out other expenditures. Closing the deficit and paying down the debt requires dealing with each of these programs on their own individual merit. A commission is unlikely to produce the consensus its members hope for, especially since Conrad and Gregg are proposing adding new veto points to the process. Congress should keep its focus on two things that will actually help reduce the debt: healthcare reform and economic growth.

The views expressed in this blog do not represent the views or opinions of Generations United.