Projected deficit growth should be alarming but Washington appears wholly unprepared for its fiscal realities
Congress received some bad news this week that is likely to be ignored if only because of its inconvenience. The nonpartisan Congressional Budget Office reports that for the first time in years, federal deficits will soon be steadily increasing, chiefly because of aging baby boomers and the rising costs of Social Security and Medicare.
The change is not imminent, as Fiscal 2017 and 2018 are expected to continue the trend of falling deficits that we've seen since the height of the financial crisis. But the 2019 shortfall is projected to creep up to $601 billion. And the issue of what to do about the deficit could arrive much earlier — Congress will once again need to raise the country's debt ceiling by mid-March, and that, if history is any guide, is likely to provoke debate (or worse).
The issue could prove even more fraught than usual because President Donald Trump has made promises on both sides of the ledger. He's talked about cutting federal spending and employment, but reports so far have revealed proposed reductions that may have far greater political significance (a hiring freeze and axing the National Endowment for the Arts, for example) than actual fiscal effect. Meanwhile, he's also promised higher spending on the military and public infrastructure as well as major tax cuts to stimulate economic growth.
Perhaps even more concerning to deficit hawks, President Trump has shown no interest in reforming Social Security and Medicare, which are at the heart of the problem. As that is a view repeated by Mr. Trump's cabinet picks during their recent confirmation hearings, this is likely more than a case of "alternative facts" and an actual policy choice. Even Chief of Staff Reince Priebus has said publicly that the administration won't "meddle" with those two popular programs.
So let's set the record straight. There's only one realistic way to reduce deficits and, by extension, the nearly $20 trillion in national debt that Republicans so frequently railed against while a Democrat occupied the White House. It requires an "all-of-the-above" strategy — a "grand bargain," if you will — that involves sacrifice from all Americans but most especially asks more from those with the ability to pay. It would involve limiting the growth of federal spending in future years and raising additional revenues through tax reform.
The most recent blueprint for such a challenging strategy was offered by the bipartisan National Commission on Fiscal Responsibility and Reform (also known as Simpson-Bowles) six years ago. We believe the commission offered many good ideas then, and they remain good ideas today. But they also appear to be orphaned as Republicans seek only to cut taxes and Democrats want only to block budget cuts.
It may be too much to expect President Trump to stand up for complex policies that, collectively, are likely to antagonize so many people. But, of course, that's how we got in this situation. Both tax increases and changes to entitlement programs are difficult, so it's much easier to keep the budget unbalanced and, in essence, let the next generation pay for it.
President Barack Obama failed at this task, but at least he can claim, rightly, that borrowing when unemployment rates are high — and the Great Recession was about as bad as economic downturns come — can be justified. While economic growth, pegged by the CBO to continue at 2.1 percent annually, is relatively anemic, the U.S. economy is in far better shape than it was eight years ago when Mr. Obama took office.
Republicans can delude themselves into believing that reducing discretionary non-defense spending can solve the problem or, even more ridiculously, that tax cuts will magically do the job. Meanwhile, Democrats have even less incentive today to embrace spending cuts than they did under Mr. Obama, given their loss last November. That combination is simply not a good formula for addressing the deficit, particularly when there's so little political penalty for pushing the problem off into the future. There isn't a "grand bargain" grassroots political movement like the tea party or the Women's March on Washington. Until there is one — or the nation is plunged into a European-style debt crisis — this is one issue where political gridlock is likely to prevail.