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.
April 28, 2010; 11:21 AM ET
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