Finding Middle Ground on the Deficit

On Thursday the Peterson Foundation will host a star-studded summit on fiscal responsibility in Washington, DC. To some readers, that might sound as hallow as the Academy Awards and as thrilling as the International Academy on Financial Management, but this is genuinely important stuff. Ruminating on about how the government collects and spends money is a big think, but as public debt approaches record levels.

Robert Kuttner doesn't like the thrust of the Peterson summit because, like many liberals, he worries that "fiscal responsibility" is a Trojan horse for gutting Medicare and Social Security. He has a point. There are, without question, some invitees at the summit who see runaway Medicare costs and conclude the quickest solution is to dismantle Medicare. That sort of bluntness would be politically unpalatable and substantively wrongheaded. But Kuttner's point is incomplete:

Yes, we will have a national debt problem if we don't get a return to high growth soon. But the more immediate problem is restoration of prosperity--and in the near term that will require more public outlay, not less. Once a real recovery is on track, we need to increase progressive taxation, both to moderate deficits and to pay for sustained public spending on things the economy and society need, such as 21st century infrastructure, a green economy, good jobs, as well as a national health and pension system.

That's basically right. But better, perhaps, to say that we will have a national debt problem whether or not we get a return to historically common growth, as the Congressional Budget Office has concluded. Yes, the more immediate problem is the restoration of prosperity. The deficit is probably too low today. But looking at that short-term goal doesn't preclude acknowledging the long-term challenge. Public debt is in trouble today and it faces remarkable challenges in the 2020s.

Kuttner says "we need a national debate" between the austerity hawks and the social program defenders. Sounds good! So let's begin where both sides agree. Many Peterson attendees agree that large deficits are necessary now and dangerous in the future. Many also agree that new taxes will have to pay for ongoing spending, and that it would be unwise to enact regressive taxes that over-burdened lower-income families. The "high road" on the deficit is more crowded that Kuttner thinks.