The Deficit Debate Isn't Just About the Deficit (At Least, It Shouldn't Be)

Washington is a town where bad math (Lower taxes! Better benefits! Forever!) makes good politics. Maybe that's why the audience at Wednesday's fiscal summit hosted by the Peter G. Peterson Foundation thrilled to former President Bill Clinton's simple three-word mantra for the deficit debate: "Arithmetic still matters."

But if today's summit -- which featured six competing budget plans from liberal, moderate and conservative thinks -- carried any lesson, it's that the arithmetic of balanced budgets isn't what we're debating when we talk about the deficit. Ultimately we're debating values, not math.

Here's why. In the chart to the left, I've quickly graphed the six organizations' solutions to budget reform by 2035. The Y-axis represents spending and revenue as a percent of GDP. What do you see? I see that that each think tank passed the arithmetic test. They all held deficits below CBO projections. But the plans couldn't look more different. Heritage closed the deficit by holding spending and taxes below their historical average. The Economic Policy Institute did it by raising spending and taxes to their historical highs.

Inside the numbers, the differences are even starker. The American Enterprise Institute repeals health care reform; the Center for American Progress expands it with a public option. Heritage eliminates the Social Security tax. Roosevelt expands it for millions of workers. And so on.

The deficit is an arithmetic problem -- a balancing of pluses and minuses. But it's a values debate -- a moral tug-of-war over the kind of government we want for the next 20 years.

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"Innovation is the most important key to long-term prosperity and economic competitiveness," the Brookings Institution writes in its new report "Growth Through Innovation." Authors Bruce Katz, Martin Baily and Darrell West agree that fiscal reform is an important part of our innovation policy, because it gives us the room to invest in policies that grow the economy through new ideas. To repeat: Fiscal reform is a part of national growth strategy, but only a part.

The paper identifies problems and finds commonsense solutions. We should stop kicking out smart immigrants who are innovating and starting companies (or at least, kick out fewer smart immigrants), so let's double our H1B visa lottery. We should find tax and non-tax incentives to push energy producers toward security and sustainability, so let's create and fund a network of energy discovery institutes at leading research universities. The best way to recover from a debt crisis is to export goods and services you make in exchange for money, so let's ratify new trade agreements and create regional business plans to guide regional economies, or clusters, to capitalize on what they do best, whether it's building airplanes or building software.

Arithmetic still matters, and it always will. But getting budget arithmetic right is just the first step to getting everything else right.