Former Congressman Martin Olav Sabo popped up in the news recently as co-chair of the Minnesota branch of the national Campaign to Fix the Debt. His co-chairs are former Congressman Tim Penny and former U.S. Sen. Rudy Boschwitz.
According to the shallowest kind of ideological and partisan stereotypes, Sabo might appear to be the outlier here. Penny, whose political career was divided between the Democratic and the Independence parties, was centrist who made his reputation as a deficit hawk and serves on the board of the Concord Coalition. Boschwitz, a moderately conservative (at least by today’s standards) and pro-business Republican, are naturals for the co-chair assignments.
Sabo, who spent a combined (hold your breath) 46 years as a DFL legislator and congressman, was a solid mainstream liberal Democrat. And liberal Democrats (according to the shallowest kind of ideological and partisan stereotypes) don’t care about deficits or debt.
So I was curious to hear why Sabo was thinking about fixing the debt, particularly because (if I can belabor this introductory claptrap even longer) several prominent liberal voices (yes, you, Paul Krugman and Robert Reich, among others) have been arguing that deficit hawkery is just an excuse for the same old righty crowd that really wants to undermine Social Security and Medicare.
So I asked Sabo about all of the above this week and here’s what he thinks:
First, Sabo is something of a liberal debt/deficit hawk. He reminded me that he was chairman of the House Budget Committee in 1993 when Congress and President Bill Clinton put together the ambitious Omnibus Budget and Reconciliation Act which launched the federal budget into several years of lower deficits and extended the projected balance of the Social Security and Medicare trust funds.
The Clinton era was a period of economic growth and shrinking deficits. By the 2000, the United States had balanced the budget and was entering a period when it seemed possible to actually pay off some of the debt.
Since 2001, the combination of the Bush tax cuts, unpaid-for spending and then the economic collapse of 2008 broke that virtuous cycle. Recently the ratio of the federal debt to the GDP has reached heights not seen since World II.
“We’ve got to get that ratio stabilized and then on a downward track,” Sabo said.
Sabo’s fundamental agreement with Boschwitz and Penny is that the country needs a “grand bargain” to get that ratio headed down, that to get such a bargain everything has to be on the table and both parties have to be willing to swallow some things that they will dislike.
“We have to deal with it on the revenue side and in all categories of expenditures, including entitlements, defense and discretionary spending,” Sabo said.
Arguments from the left
Sabo told me he was well aware of the arguments coming from the left that – because of the enormous concentration of wealth at the top that has occurred over recent decades – the solution to all fiscal problems is to keep raising taxes on the wealthy. He seems to favor several ideas along those lines, although he is also aware that several little-known high-end taxes were smuggled into the Obamacare law.
He also acknowledged one of Paul Krugman’s frequent arguments, that the interest rates on U.S. bonds are so low that the Treasury is almost borrowing money for free. “But those rates are artificially low,” Sabo said. When they return to normal and the United States has to pay bondholders at more normal rates, the government’s interest costs could “explode.”
Sabo doesn’t really reject Krugman’s Keynesian argument, that the best long-term cure for the debt is economic growth and the surest way to stimulate growth in the short term is to keep borrowing and spending. And it’s also true that Krugman does acknowledge, when pressed, that deficits do matter, or will someday become a problem. He just says now is not that time. Krugman points out that European countries that adopted austerity budgets over recent years have experienced double-dip recessions.
Sabo isn’t really advocating an austerity program along those lines. He is basically advocating a long-term grand bargain that will bring the debt down to more sustainable levels as the economy recovers.
Entitlements can’t be spared
As far as the effort to shelter entitlements from any cuts, Sabo is sympathetic but thinks it may turn out to be unrealistic. For one thing, what the demographers and health care experts have been saying is fundamentally true: The declining ratio of workers paying FICA taxes to retirees drawing Social Security and Medicare benefit and the development of expensive new medical treatments means that those programs can’t be sustained at their current growth rates.
Like Obama, Sabo said, he is interested in possible structural reforms that would reduce the cost of those programs without cutting direct benefits. But he isn’t optimistic that the potential savings would be enough to sustain the programs.
“To my friends on the left who say we can spare the entitlement side and cut enough from discretionary spending,” Sabo said, “they should think about food safety programs and environmental programs and regulatory agencies and education and everything else that would absolutely get clobbered if we tried to shelter entitlements from any cuts.”
Social Security and Medicare
Sabo and I discussed another theme that circulates on the left, that those who complain about the unsustainability of entitlement programs are really just trying to panic the country into privatizing Social Security and voucherizing Medicare. A lot of this theory revolves around the work of billionaire businessman and former Commerce Secretary Peter G. Peterson, who, through his eponymous foundation, has spent billions raising the unsustainability argument.
Personally, I have never seen the evidence that this is Peterson’s secret goal. The Peterson Foundation is also substantially bankrolling the Committee to Fix the Debt.
Sabo didn’t express an opinion about Peterson’s motives. As for privatizing Social Security, Sabo has strong views and they are entirely opposed.
“I happen to think that entitlements are very important and maintaining them as guaranteed benefits that lasts for a lifetime is vital. Incredibly crucial. And the idea that Social Security is going to disappear unless we turn it into some kind of an IRA is just a myth.”
So I guess that’s one idea that Sabo would not put on the table for the grand bargain. But, other than that, the everything-on-the-table logic is fundamentally political. Neither party has the votes to enact its own preferred version of the long-term path to debt reduction so the only way to get on that path is bipartisan compromise.
“In my 28 years there [in Congress], the Democrats controlled the White House and both houses of the Congress for a total of four years,” Sabo said. So each party can have fun imagining how they would address the issue if they didn’t have to make a deal with the other side, but it’s not going to happen any time soon. To be a Grand Bargain, Sabo said, the bargain will have to be bipartisan and each party to such a negotiation has to accept that the final bargain will have some elements it dislikes, perhaps dislikes intensely.