“Our spending has caught up with us, and our debt will soon eclipse the size of our entire economy. No longer can we kick the can down the road.” So declared Speaker John Boehner in his maiden speech to the U.S. House of Representatives. In the weeks following Boehner’s assertion, budget battles have consumed Washington, with Republicans and Democrats contending over a plan which ultimately cut some $38 billion in discretionary spending. For all the sound and fury of the past months, however, progress on balancing America’s finances remains elusive.
If the nation’s lawmakers are serious about addressing the nation’s debt dilemma, they must push questions of discretionary non-defense appropriations into the background, and devote their attention to more pressing concerns of entitlement and defense spending. In this light, current debates inhibit such focus more than they assist. Factional conflict over trivial portions of the discretionary budget has stalled the bipartisan compromises necessary to address the real substance of the budget deficit. Without such agreements in place, the national debt will continue to grow until America’s leaders address its root causes.
Flood of Red (Ink)
In fiscal year 2011, the annual deficit of the federal government stood at a record $1.6 trillion, with the national debt at an all-time high of $14 trillion. To some extent, the headline numbers owe their magnitude to the effects of the ongoing economic downturn. Total revenue remains some half-trillion dollars lower in 2011 than it was in 2008, while federal stabilizing programs, such as unemployment insurance, have caused governmental expenditures to balloon. Should taxes and automatic spending return to their historic level, the deficit would stand at somewhat under a trillion dollars, still higher than the historical average, but not so much as today.
Nonetheless, the volatility of the recession should not distract lawmakers from more serious budgetary problems. On January 1, 2011, the first of the baby boom generation turned 65, reaching the age for full retirement. Over the next decades, mandatory entitlement programs, notably Medicare and Social Security, will consume an ever-greater amount of the federal purse. Such expenditures dwarf other spending by an order of magnitude. As Harvard Kennedy School professor John Donahue told the HPR, “even if we cut all discretionary spending out of the budget, we would still have a debt problem.” Lawmakers might find a way to balance the budget in the short-term, but left unchanged, long-term entitlement costs will ultimately swamp the boat.
Why Fight?
Although most policymakers agree on the importance of addressing growing federal debt, the budget battles on Capitol Hill may have done more harm than good. Linda Blimes, Kennedy School public policy professor and author of The Three Billion Dollar War, argues, “I think the Republican effort to cut spending just for the sake of cutting spending is incredibly short sighted. This current situation in which the entire government is…fighting over small amounts of budget cuts is extremely disruptive.” Blimes contends that budget-cutters’ outsized focus on discretionary domestic spending does little to deal with the root causes of the deficit, given that discretionary spending amounts to only one-sixth of the total budget. Instead, Blimes argues, contentious fights actually cut comparatively little money, but they do serve to alienate both parties from the other. Such hostility may prove more costly than even the typical partisan struggle. The key to any budget deal lies in both parties’ ability to trust the other; reducing that relationship diminishes any incentive to cooperate.
Nonetheless, while discretionary programs may cost little, as far as the total budget is concerned, cuts to them may suffer substantial consequences. In particular, some of the least expensive programs in the federal budget, such as Americorps, still enjoy an outsized impact on the nation’s general well-being. Reducing small-but-effective programs for the sake of cuts would seem an exercise in futility. As Blimes asserts, “The markets don’t care whether we cut a billion dollars out of the Head Start program or any other program. What they want to see is what are we doing over the next thirty years…to deal with the rise in pensions and across the board government spending.”
Mandatory Spending, Mandatory Cuts
If domestic spending ultimately impacts the long-term budget relatively little, however, entitlements remains the crux of the federal debt crisis. The Congressional Budget Office estimates that by 2040, mandatory spending on Social Security, Medicaid, Medicare, and interest will consume every penny the government brings in. Nonetheless, sustainable solutions can and do exist. Donahue argues that Congress should raise the minimum age requirement for benefit collection, attempting to increase the number of workers supporting each retiree. By contrast, David Certner, legislative policy director for the American Association of Retired People, contends that Americans enjoy the security of entitlement programs in their current forms, and would prefer higher taxes to sustain such benefits. In practice, a combination of tax hikes and demographic adjustments should suffice to avoid most dire scenarios.
To be sure, entitlement reform questions touch on other substantial issues. Certner claims that Medicare’s outsized expected growth owes to the fact that “Medicare is not a self-contained program; it’s just a part of the larger healthcare system. All healthcare providers are finding that their costs are rising much faster than costs in the rest of the economy.” Likewise, the essence of Social Security’s problems remains the decreasing number of workers per retiree as compared to when the program first launched. Congress may find it more difficult to fully secure entitlements’ future while other national problems persist. Nonetheless, there exist concrete steps that legislators can, and ultimately must, take. The perfect need not be the enemy of the good.
Political Arrest and Economic Distress
The heat of the budget battle aside, there exists bipartisan consent that Medicare and Medicaid are growing at unsustainable rates, and that Social Security’s payouts will soon exacerbate the already unmanageable deficit. While precise details of any agreement may vary, there remains ample space for efforts to secure entitlements’ future. Nonetheless, a hyperpolarized Congress has hindered these bipartisan objectives, with many proposals ending in legislative stalemate. Unless legislators take steps to break the logjam, entitlements costs will compound.
Ultimately, America’s budgetary problems are less economic than political. To bridge the partisan divide, congressional representatives ought to remember that duty to their constituents and nation comes before party allegiance. To step back from economic disorder, representatives must first acquire the necessary political and structural tools to diagnose the debt problem as they seek to tackle it.
Aditi Ghai ‘14 is a Staff Writer.
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