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Doing a bit on the deficit beats doing nothing

I think the popular understanding of our long-term fiscal problem is that the problem is that politicians keep voting to spend more money and raise less money and that we'll get the situation under control when they get serious and start voting to spend less money and raise more money.

That's not quite right, though. The major drivers of our long-term deficit are automatic expenditures. Medicare, for instance, spends more each year because a ticket to the health-care system gets more expensive each year. Congress votes to avoid cuts to medical care, but we're not seeing an annual expansion of benefits. Similarly, Social Security isn't getting bigger because Congress votes to make it bigger each year. Rather, it's getting bigger because more people become eligible. The really relevant decisions were not made by the 111th Congress. They were made decades ago.

Similarly, what's likely to force action isn't the political system "getting serious" in some spiritually significant way. It's the market upgrading the risks of loaning money to the U.S. government. That could be interest rates rising or Treasury auctions that fail to sell a sufficient amount of debt or some broader signal. But at the end of the day, our deficit problem is likely to get worse slowly, and then get much worse all of a sudden. And it's the consequences of that "all of a sudden" that are likely to spur action, as the decisions are too hard for politicians to actually take responsibility for. But if it's really the bond market making decisions for us, well, that's a bit easier.

So you have a current Congress dealing with problems created by past congresses and facing a crisis that may not come anytime soon. Add in a terrible recession and a competitive electoral environment, and it's not a great situation for difficult compromises.

But the Center for Budget and Policy Priority's Bob Greenstein made a nice point on this: The choice, he said, isn't between solving the problem before the crisis hits and waiting for a crisis. Solving the problem requires doing more than the political system is able to do outside a crisis atmosphere. But making a start on the problem isn't. And if you can make enough of a start, you can delay the crisis and/or mitigate its eventual severity. The problem is that people tend to dismiss doing a bit because it means we won't do enough. But if we attempt to do too much, Greenstein said, we run a large risk of doing nothing at all, and that will be much worse.

By Ezra Klein  |  April 28, 2010; 11:21 AM ET
Categories:  Budget  
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Comments

The defense budget is the big difference between us and those countries that provide a real safety net and decent services for their people. The macho individualists love it, though, and hate social services. But we have to face that we can't do everything, and isn't it better to do nation building at home where we derive some real benefit from it instead of in some country where they don't like us anyway, because we think we have to in order to keep up our profligate energy useage. It is all connected, really, and we have to start first by facing a bit of reality.

Posted by: Mimikatz | April 28, 2010 11:45 AM | Report abuse

Good post, but you should have added a paragraph saying that increasing spending on FILL IN THE BLANK would only increase by X% per year, and that anyone who would oppose that particular increase in spending is a heartless wretch who should be shunned by civilized society. You've already written lots of those paragraphs, so you wouldn't even need to write one from scratch.

Posted by: ostap666 | April 28, 2010 12:02 PM | Report abuse

I'm especially tired of so many people talking as if there was enough "wasteful" spending that we could reduce the deficit without cutting medicare, medicaid, social security, AND defense, all while still lowering taxes.

As Ezra points out, much of this spending is outside of our control. What is, is defense, but we live in a political climate where if Democrats actually make cuts to the one major piece of the budget that we can, defense, (eg. F-22's, missile defense, etc.) they get blasted for being "weak on national defense."

Posted by: nylund | April 28, 2010 12:10 PM | Report abuse

and as was stated later on in the meeting just wait until our debt is racked up and interest rates go up.

It'll be like the US is a homeowner in an underwater mortgage and the ARM just shot up from 5% to 10%.

Everything must be on the table. That includes defense AND social programs.

Posted by: visionbrkr | April 28, 2010 12:19 PM | Report abuse

Reiterating several items above, "The major drivers of our long-term deficit are automatic expenditures" which "must be on the table. That includes defense AND social programs." Further "increasing spending on FILL IN THE BLANK would only increase by X% per year," making small upward changes have significantly more effect than small downward changes.

The missing part seems to be the willingness to refrain from calling someone who proposes a social program cut "a heartless wretch who should be shunned by civilized society."

Once the pot is empty (as it is in Portugal, Greece, etc.), what then?

Posted by: rmgregory | April 28, 2010 12:27 PM | Report abuse

Ezra,

I always get my laugh of the day by reading your posts. This congress just voted for a massive expansion of a health care entitlement program that will make it that more difficult for future congresses to balance the budget. And just like any person who only makes the minimum payment on their credit card, any wasteful spending, no matter how small, will be compounded over time because you are paying interest on it every year and not paying down the principle. My 14 year old daughter has more financial sense than you and your congressional heros have.

Posted by: cummije5 | April 28, 2010 12:44 PM | Report abuse

--The missing part seems to be the willingness to refrain from calling someone who proposes a social program cut "a heartless wretch who should be shunned by civilized society."

Once the pot is empty (as it is in Portugal, Greece, etc.), what then?--

You forgot the part where anyone who suggests cutting a defense budget that's larger than the rest of the world's defense budgets combined (or something like that) is a "gutless coward".

Posted by: jonboinAR | April 28, 2010 1:45 PM | Report abuse

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