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Obama's fiscal responsibility summit, as seen by a consistent, honest fiscal conservative

President Obama will spend this afternoon at a "fiscal responsibility summit" to call attention to the unsustainable fiscal course on which our national government has been stuck for many years. He is trying to send a signal that as soon as we get done spending like drunken sailors to stimulate the economy, halt the foreclosure crisis, save the banks and a few other tasks, we really need to move toward lower deficits. By all accounts, when he rolls out his long-term budget blueprint on Thursday it will call for the deficit to be cut in half between the first year of his term and the last.

Despite my Bolsheviki views on some other issues, I'm a long-time deficit and debt hawk. Long before the current economic crisis hit, I wrung my hands (pointlessly, but it's on the record) over what we are doing to our kids' futures by living high on borrowed money and leaving them to shoulder the debt.

So, I'm very glad that Obama keeps bringing this up. I hope he means it and will follow through. So far, of course, it is all just words and good intentions, and convening a "summit" has a certain odor of the symbolic act. I'm trying to live in my hopes and not my fears. But on this issue more than most, skepticism is justified. Neither party (yes, I know that Clinton did considerably better on this issue than did Reagan or Bush, although the idea that he had taken care of the problem until W. messed it up again is a bit of an exaggeration) nor the population at large has shown an appetite for facing the reality of what it will take to address the issue.

Robert L. Bixby
Concord Coalition
Robert L. Bixby

But one organization that has consistently advocated fiscal responsibility, done the hard way without smoke or mirrors, and done it in a consistently non-partisan way, is the Concord Coalition. Concord's executive director, Bob Bixby, has big credibility with me for calling the deficit balls and debt strikes honestly. So I called him yesterday to get his guidance on Obama's let's-talk-about-reducing-the-deficit-while-we're-adding-to-it approach. Here's what he said:

1. Being a deficit hawk doesn't mean you aren't a Keynesian: Often over recent years, Congresses and presidents have relied on deficit spending simply because they weren't willing to face the hard choices. But that's not the situation now. The economic emergency makes this a really tough time to wave the flag for fiscal responsibility because there’s a really strong case to be made for spending more and taxing less to revive the moribund economy.

2. Stimulus as a Trojan horse? Bixby does worry that Obama and the Democrats have, in the name of stimulus, passed programs that won't provide an immediate stimulus (because the money won't get into circulation fast enough) but that will create new long-term spending programs. Some of them, having to do with computerizing health care records or incentivizing alternative energy development, strike Bixby as good ideas, but they could and should have been done through the regular budget process rather through an emergency stimulus bill, so their long-term impact on the debt could have been properly weighed against all the other spending priorities.

3. Obama's fiscal responsibility rhetoric "has been exactly right." I kinda expected Bixby to be more leery of such rhetoric, since it is, after all, just rhetoric and Obama has little track record as a fiscal conservative, nor did he, during the campaign, go much beyond the standard Dem position that taking away the Bush tax cuts from the richest 1 percent would cure what ails us. But Bixby gave Obama big points. "Since the economic crisis hit, he has always conveyed the sense that even as we spend in the short term, we can’t lose track of long-term need for fiscal discipline. That rhetoric has been exactly right." And that message has not been popular with the Dem base, which increases the chance that Obama is saying it because he really means it.

4. Can Obama do anything this week to prove that he really means it? Not much, Bixby said. The proof will have to come later. But Bixby is looking for signals that Obama really gets it and is preparing the public for painful choices that will have to be made. For example, he hopes Obama makes clear that reining in the long-term cost of Medicare and Social Security are the most important items on the long-term fiscal responsibility agenda. Bixby worries that when the general public hears Obama talk about health-care cost controls, they think it means controlling the cost to them as patients. Sooner or later, someone will have to take the heat for telling the public that some of the pain will have to be shared beyond the richest 1 percent. Bixby also hopes today's "summit" will create some kind of process going forward that will keep fiscal restraint on the table and force consideration of concrete ways to cut spending and raise revenues. If the summit doesn't create a process for future decisions, a plan to create a bipartisan commission on entitlement restraint for example, it will increase the chance that Monday's event is nothing but a photo op. But Bixby is realistic. He might wish that Obama would roll out this week his ideas for entitlement restraint, Bixby said, but the president isn't going to do that.

5. A blueprint to cut the deficit in half isn't enough, but it's better than nothing. Bixby generally gave Obama credit, as have many writers, for using more honest budget and deficit numbers than President Bush did. Bush kept the costs of the Iraq war out of his budget blueprint (making the deficit look smaller) and then smuggled the money back in as a special supplemental appropriation. But the resulting deficit and debt were just as real as if they had been honestly disclosed. Bush budgets employed a similar smoke-and-mirror trick with the the Alternative Minimum Tax. Obama is foregoing those particular tricks. Bixby said he likes the fact that Obama is going to set a goal of cutting the deficit by half over the first term. But when you realize that the deficit will start Obama's term at about $1.4 trillion (before 2003, there had never been a deficit as large as $300 billion), cutting it in half would still leave us with a huge, unsustainable level of borrowing heading into the difficult period of the baby boomer retirement.

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Comments (5)

"Fiscal responsibility" sounds like a good idea. Who could argue for irresponsibility?
But the problem is that in the current political environment, 'fiscal responsibility' is too often a code word for something else. If we are to be truly responsible, we need to agree on what problems we are trying to solve.
We do face an enormous national debt and a projected huge deficit on the state level in Minnesota. But from my perspective those problems are only symptomatic of larger problems in economic equity and justice -- in the language of business performance, they are 'lagging indicators' of some more fundamental problems.
Take, just as example, problems in education. Economists agree that investments in 'human capital' -- creating a skilled workforce -- are essential to future productivity and prosperity. As an example of a 'leading indicator', the Department of Corrections uses third grade reading levels as a predictor of future demand for jail cells, an expensive proposition. We know too, that investments in schools are only part of the solution. There is an enormous achievement gap for students living in poverty. 30% of students in Minneapolis public schools are classified as 'highly mobile' -- meaning they lack stable housing or are actually homeless and as a result lack continuity in their education. 12% of student in the state live in poverty, and 50% of those are under age 5. Only three states have a higher poverty rate amongst African-American children than Minnesota: Mississippi, Louisiana, and Oklahoma.
From a coldly economic perspective, this means that we are destroying potential productive capacity and a source of long term economic growth. On a local level, under the banner of 'fiscal responsibility', Governor Pawlenty's demagoguery around 'no new taxes' and proposed cuts in Early Childhood Education and Day Care, cuts to funding for financial aid to higher education students, and to programs like PSEO should be recognized as 'fiscally irresponsible' – destroying our capacity to rebuild our economy.
On a national level, the debate about ‘fiscal responsibility’ has been similarly distorted. The problem of ‘fiscal responsibility’ is not that the elderly and disabled are entitled some assurance of economic security and healthcare so as not to be a burden on their children, nor that students need education, nor that the unemployed need assistance in maintaining their skills and productive capabilities while searching for a job, nor that the uninsured need access to quality healthcare and prevention before sustaining catastrophic injury or illness. These are problems of justice and the social responsibilities we have to each other. There are certainly economic and fiscal dimensions to these problems and longer term impacts if these problems are allowed to fester.
I am hopeful that the Obama administration can take steps to recast the debate not simply in terms of ‘fiscal responsibility’ but also social responsibility. Peter Orzag, Obama’s Budget director, seems to have a reasonable handle on the issues. Problems in basic Social Security funding have a relatively long time horizon and could be resolved by raising the regressive cap on taxable incomes. Medicare and Medicaid are more immediate problems that will require fundamental changes in health care and health insurance as a whole. And a return to more progressive taxation rates and the expiration of the Bush tax cuts for the wealthiest can provide the basis for investment to rebuild our economy on a more solid, sustainable, and efficient basis. Doing so requires that we address broader issues of social responsibility.

Ditto to Bruce Johnson. I would add that discussion of the deficit needs to be matched by discussion of what public investments we are willing to make AND the expected outcomes. I believe we have the wealth to do more without deficit spending, but need to be clear about the real impact of taxes on business and individuals. Taxes have been so badly demagogued over the last 30 years, it is dificult to have a sensible discussion regarding them. Reduction of the deficit while making necessary investments in early childgood education, education k-12 and beyond, physical infrastrcture, health care, etc. will require more revenue. I think the case for higher taxes can be made if they are tied to outcomes that either same money (healthcare and early childood ed) or produce wealth (education and infrastructure)AND effective programs are launched and held accountable (thus reducing the deficit). National security also needs to be part of the discussion: wars of choice are very expensive and unnecessary -- as we can see. Lack of national security fiscal discipline damages true national security.

Deficit reduction outside of the broader context of public investment is only half of the issue.

A good article and Bruce Johnson's comments are excellent. I'm afraid that this conference is little more than another effort to gut entitlements at the expense of lower and middle class Americans. Unless "conferees" are willing to tackle our 50% of budget (without entitlements) military expenditures,put cost-saving single payer health coverage "on the table," and consider seriously applying the FICA tax to all earned income, this conference is another scam. And the Concord Coalition, despite their press as high-minded, is a part of it.

Thanks Bruce, Ted and Thomas,
To me, the term "fiscal responsibility" has nothing to do with the "no new taxes" religion of Reagan and post-Reagan conservatism. It means a government living within its means except in special circumstances, when the need for stimulus spending justifies short-term deficit spending. So proper fiscal responsibility includes the possibility of raising taxes to pay for what the government spends.
But as long as we have a two-party system, it will be hard to make progress toward fiscal responsibility if both sides get dug in on the things they are unwilling to do and it turns out that the only things side one is willing to do are the things side two is unwilling to do. Starting with a $1 trillion-plus deficit, it seems clear to me that we need tax increases AND spending cuts.
My priorities would be similar to yours but
to make progress, we need as few sacred (off the table) cows as we can manage.

Amen to Thomas Olson's comments (and others). The Obama health plan, so far at least, will be similar to the Massachusetts plan -- hundreds of millions of dollars over budget and still not universal. Universality would come, hopefully, not too far in the future.

Single payer would put us in the good company of all the nations in the world who consider health care a common good, one never to be withheld. A system like the one proposed by John Conyers (see HR676) would significantly cut costs by eliminating (over 10 years) the private insurance industry and its 20% or more administrative costs. With single payer, administrative costs would be about 1-2%, like Medicare's. In spite of covering everyone, we would save billions every year over what we now spend.

And yet the Congress, the administration, and experts like Dave Durenberger just keep saying America is "not ready" for single payer. If not now, when????

Employers would never again have to worry about employee health care, its administration and its ever-rising costs. Workers would not have to stay at jobs they hate in order to receive care.
Single-payer would be 100% universal -- no person would be denied necessary care ever and no one would still pretend that being able to go to a hospital emergency room is the same as having a regular doctor.