Friday, April 6, 2012

Compromises necessary to cut deficit, debt

We're seven months from the election, and already both parties have drawn their lines in the sand that will doom the country if there is no compromise. Instead of seeking compromise and finding a middle ground that will save the country from financial ruin, both Democrats and Republicans are gambling the nation's solvency on a double-down bet on the next election.

Both parties are digging in their heels over taxes and spending, each playing to its own core constituency without any apparent willingness to do what is best for the nation as a whole. Since 2000, when the federal budget was balanced (at least in part, if you don't count Social Security obligations) in the final years of the Clinton administration, the federal deficit and federal debt have soared. We are now spending a trillion dollars more than we take in each year! There are many reasons for this: huge tax cuts pushed by President George Bush, two costly wars that were financed "off-budget," increased national security spending in the wake of 9/11, and a staggering recession that reduced tax revenues. And also this: an unwillingness on the part of Congress to address the difficult problem of balancing taxes and spending.

President Obama, who rejected the recommendations of the Simpson-Bowles deficit reduction committee that he appointed, has attacked Rep. Paul Ryan's GOP budget plan as destructive. The Ryan plan calls for elimination of unspecified tax breaks while further reducing the tax rate for the wealthiest taxpayers. Obama wants to increase taxes on those earning more than $250,000 a year, and he says Ryan's plan for turning Medicare into a grant program for health insurance premiums would mean the elimination of Medicare.

But here's the key fact about both Ryan's and Obama's plans: Neither would eliminate the federal deficit in the foreseeable future. Ryan's plan reduces the deficit primarily through cuts to Medicare and other social programs and the elimination of tax breaks to be named later. Obama has not proposed a plan that would significantly cut the deficit, and his commitment to not raise taxes on those making less than $250,000 effectively eliminates any hope of raising the large amounts of revenue needed to cut the deficit.

Both parties need to turn back the rhetoric and erase those lines in the sand. Democrats will have to stop portraying themselves as the saviors of Medicare and Social Security and recognize the fact that neither program is sustainable in its present form. Revisions will be necessary to keep the programs solvent. Small adjustments in eligibility age, co-payments, service delivery and payroll taxes could repair these programs with minimal pain. Moreover, every federal program or federal grant to the states, is not effective or efficient. Cutting ineffective programs is just good management. But every program has constituents, and constituents have lobbyists, and Congress does not like to say no to lobbyists.

For their part, Republicans will have to give up their doctrine that tax cuts are the cure for every ill that faces the country. If you're willing to vote for spending programs (and I'm not talking about the debt limit), you have to be willing to vote for the taxes to pay for them. The nation will not be able to cut its way out of this budget deficit simply because Congress will not cut defense spending or Social Security to any significant degree, and it cannot cut interest on debt, which is an increasingly large portion of the total budget.

Instead of lobbing pot shots at each other, the parties need to come together under the principle of shared sacrifice. For Republicans, that means the "job creators" (otherwise known as the wealthy) will have to pay higher taxes. For Democrats, that means the working class or middle class — people making less than $250,000 will see their taxes rise as part of the shared sacrifice. The only way we can cut the deficit is by doing it together. These are sacrifices for the good of the country. Unless compromises can be won, we will all share in the economic despair that is inevitable for a society that cannot stop living beyond its means and whose leaders refuse to compromise.

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