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.
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.