This post has been corrected, as indicated below.
The federal government has some daunting long-term budget problems, and the November election will give voters a choice between candidates with fundamentally different views over how to respond. To put it simply, President Obama wants to raise tax rates on high-income Americans and his likely Republican opponent, former Massachusetts Gov. Mitt Romney, wants to lower them.
What more do you need to know? Lots, according to the Committee for a Responsible Federal Budget, an advocacy group for lower deficits. In fact, the group contends, Obama and Romney have left so much unsaid about the problem and their plans, it wants one of the three presidential debates scheduled for the fall campaign to be devoted to the federal debt and deficits.
From the committee’s news release:
At the debate, each candidate would present and defend his plan to achieve the amount of savings needed to stabilize the national debt as a percentage of GDP. A moderator would lead the candidates through a discussion of their spending and revenue proposals. The plans could be scored by outside experts ahead of time so the discussion wouldn’t get bogged down with accusations of inaccurate math.
Naturally, every interest group would love to have that kind of attention paid to its pet issue. But Washington’s fiscal mess is at or near the top of the list of challenges facing the next president. The debt owed to the public is more than $10 trillion, or 68% of the annual output of the U.S. economy, according to the Congressional Budget Office. If current tax and spending policies remain in place, the CBO estimates, the debt will be close to 100% of U.S. GDP in a decade. (If you include the money owed to Social Security and other government programs in the national debt, it’s already a tad larger than U.S. GDP.)
The size and growth of the debt is fueling a rapid rise in what Washington has to spend on interest payments every year, which leaves less money for defense, social programs and other priorities. And the situation could get significantly worse in a hurry if investors (and ratings agencies) lose confidence in the federal government, forcing the Treasury to pay a higher interest rate in order to borrow money.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said it’s not enough just to have a debate over whether to raise tax rates or lower them. A debate devoted to fiscal topics would force the candidates to talk in greater detail about the consequences of their policy choices. For example, how much more do you have to cut spending if you don’t raise taxes, or if you raise them only on people with incomes over $250,000? How much do you have to cut from other federal programs if you go slow on entitlements, such as Medicaid and food stamps?
“The point is to make transparent the trade-offs between the approaches,” MacGuineas said. “And since Obama has repeatedly offered plans that are too small to actually fix the problem, and Romney’s are too vague, one of the goals of the debate is to have the candidates put out plans that are big enough to fix it.”
Former Rep. Bill Frenzel (R-Minn.), a co-chairman of the committee, added, “We need to go further because none of the candidates ever quite answer the question” about how to fix the budget mess. The deficit-cutting plan developed by the co-chairmen of the National Commission on Fiscal Responsibility and Reform is widely considered the “gold standard” for such efforts, Frenzel said, but “one candidate’s plan does not get there, and the other’s is without detail.”
A poll last month by Gallup showed that the public cares about the debt and deficits, but the economy is a bigger political issue. And that’s appropriate; the faster the U.S. economy grows, the less daunting the deficit problem will be.
MacGuineas said that growing the economy is a necessary part of the discussion about how to tackle the growing debt, but it’s not the only part that matters. If candidates focus only on increasing the GDP, “it will degenerate into just the normal kind of D.C. conversation where everybody claims that whatever their favorite policy is, it would promote growth regardless of any evidence.”
The committee is one of numerous interest groups that MacGuineas expects to join the call for a debate devoted to the debt. And as the rare (and, arguably, damaged) individual who’s fascinated by budget and tax policy, I’d love to see it happen. But regardless of any mandate that the next election delivers, the sitting president and current members of Congress could make a series of crucial decisions about fiscal policy in the weeks before November’s winners take office.
That’s because the Bush-era tax cuts are due to expire Dec. 31, as is the temporary two-percentage-point reduction in payroll taxes, the temporary suspension of inflation adjustments to the Alternative Minimum Tax, and the waiver of deep cuts scheduled in Medicare payments to doctors. Also looming in January is the start of large across-the-board cuts in federal spending. And to top it all off, the federal government may need to raise the debt ceiling at the end of the year just to keep operating.
Those scheduled tax hikes and spending cuts represent a “fiscal cliff,” MacGuineas said, and if Washington goes over it, the country will likely fall into recession immediately. Ideally, lawmakers and the Obama administration will replace those abrupt changes with a plan that gradually but steadily shrinks the deficit and stops the debt from growing faster than the economy. What’s more likely, though, is that they’ll punt the issue to the next Congress and the president who begins his term in January. That’s all the more reason to have Obama and Romney give voters a much clearer picture of what they would do to close the yawning federal budget gap.
[For the record, 7:50 a.m. May 1: The original version of this piece misidentified the Committee for a Responsible Federal Budget as the Committee for a Responsible Federal Government. The latter may be the spirit that informs the group, but the former is its actual name.]