Will 'Fiscal Science' Save Us?

Government will make better decisions about taxing and spending if we set hard goals and explain to the public how we'll reach them, according to new research presented to the Federal Reserve.

A starting point towards a new fiscal "science" could be public-debt sustainability--a pledge to pay back what is owed, which is shared by governments everywhere. From there, the paper said fiscal research and policy could include a debate on whether a debt target is desirable and what that target should be; how rapidly tax rates and spending should adjust to stabilize debt; and any circumstance when changes in the debt target are allowed.

It's the we-never-talk-anymore approach to budget making. Sounds like fiscal marriage counseling. Even if this is sound advice from a policy level, it's difficult to create any sort of consensus on an appropriate debt-to-GDP target. Some say it's 60 percent. Some say it's 90 percent. Some say, "Debt targets? Fuggedaboutit." So that's a problem.

Let's assume, however, that we lived in a country where there was broad and bipartisan consensus that the deficit was serious and debt reduction was necessary in the medium term. That world isn't so far from, say, Congress circa right now. 

But bipartisan recognition of the problem isn't inspiring much hand-holding. The House Minority Leader is calling for $1.3 trillion in spending cuts, but no Democrat has signed on. The White House is calling for $700 billion in tax increases over the next ten years, but no Republican has signed on. There's no indication that Republicans and Democrats are even close on agreeing how to adjust tax rates and spending cuts. In Washington, budget graphs aren't like science questions. They're Rorschach blots.