Originally published in the New York Times
Not surprisingly, troubled economic times often beget proselytizers of wacky, extreme ideas. The stagflation of the 1970s blessed us with damaging wage and price controls and the utterly counterintuitive supply-side notion — famously drawn on a napkin — that cutting taxes would lead to higher tax revenues.
The American economy is surely in better shape today, but the fringe ideas (even from prominent commentators) for how to address growing federal debt are neither less numerous nor less dangerous.
From the left comes the proposition that given the slow economy, we should defer attending to the problem of mounting obligations — and the truly delusional idea that growing federal debt doesn’t matter because we owe most of it to ourselves.
Meanwhile, conservatives have put forth increasingly draconian budget plans. In his new book, my friend David Stockman stumps for a balanced budget amendment, a potentially disastrous idea that should have exited the stage years ago.
It’s time for the sensible center to rise up and push for a rational approach to our fiscal challenges.
Above all, we must not become dispirited to the point where we repeat past mistakes of embracing superficially appealing, but ultimately deleterious, radical ideas.
So let’s be clear about a few key principles of a centrist solution. First, there is no conflict between believing that we urgently need to address our long-term fiscal problems and also need to support short-term initiatives to boost our economy.
But any such measures should be temporary and focus on investment projects that will enhance our competitiveness. Additional tax cuts or consumption-oriented spending programs would provide no more benefit for the economy than dropping hundred-dollar bills from airplanes.
Second, our long-term fiscal challenges are genuinely frightening and can’t be airbrushed away. In addition to $12 trillion of debt held by the public, we’ve racked up, by various projections, some four times that amount in unfunded obligations, principally for Medicare and Social Security.
Yes, this is money that we’ve taken out of our children’s pockets: money that should have paid for our own retirement and health care bills, which our children will almost certainly end up paying instead.
The magnitude of these obligations is just too gargantuan to ever be fully reversed, but we must start now to bend that curve, particularly because any changes in Medicare and Social Security must be phased in over a long period of time. (The menu of policy options is, by now, familiar; we need to start making hard choices.)
That said, in a fragile economy, with the average American still earning less than he did a dozen years ago (after adjustment for inflation), federal belt tightening must occur gradually, a concept that is apparently foreign to both Mr. Stockman and Representative Paul Ryan, the chairman of the House Budget Committee.
For his part, Mr. Ryan seeks a balanced budget over the next 10 years, which he would achieve by eviscerating core programs from Medicaid to food stamps while repealing Mr. Obama’s health care plan (but retaining the new revenue embedded in it).
So draconian are his cuts in these programs that he achieves balance in his budget without touching Social Security or cutting materially more from Medicare over the next 10 years than Mr. Obama would.
But he says little about his own plans for Medicare and Social Security, other than that their benefits should be tied to recipients’ incomes.
As for Mr. Stockman’s intentions with regard to the rest of the budget, we get a clue in his call to eliminate 10 cabinet departments and Federal agencies. Heaven help us if he should ever have his hands on the nation’s budget levers again.
The fact is, we will not balance the budget in this country anytime soon — the size of our unfunded liabilities and the costs of our aging society would make doing so irresponsible.
And in any event, modest budget deficits can be part of a responsible fiscal policy, particularly if government spending can be tilted toward investment-oriented areas.
But at the moment, our fiscal policy can’t be described as anything resembling responsible. For us to make progress, the time has come for the centrists to reclaim the stage from the extremists.