The Evans Rule For Deficits: Let's Worry at 6.5% Unemployment

Washington might be awful at coming together to pass budgets, but it's rather good at coming together to talk about budgets. Today, The Atlantic is hosting a massive economic conference to debate The Debt, in all its shades -- good and bad, short-term and long-term, public and private, ours and the world's.

Today, I spoke with Alice Rivlin, the first director of the CBO who has worn more hats than I can name -- at the Federal Reserve, the OMB, Brookings, the president's deficit commission, and on the list goes. Her position on the debt is pretty clear. She supports high deficits today, and she supports lower deficits in the next decade. To get there, she wants a balanced approach between discretionary spending cuts, tax revenue increases, and entitlement reforms that save us money, not only in the next 10 years, but in the 10 years after that (... and after that).

What she said didn't surprise me, on a sentence-by-sentence basis, but the sum her statements raises a larger question. She said the Paul Ryan budget reminded her of every other Paul Ryan budget, and not in a good way. She said she had fewer objections to the president's budget, but that she would still like to see more eagerness among Democrats to change entitlements. She said she didn't want to cut spending too dramatically now. She said that the sequester was a dumb idea. She said she didn't agree with Paul Krugman (and other critics of deficit hawks), because she's worried about the long-term right now.

I agree with Rivlin. And I agree everybody else who worries about long-term deficits. I believe that current spending trends, projected over the next 10 or 20 years, point to a risky future for U.S. finances. They don't guarantee a debt crisis. But they dramatically raise the odds.

I just don't agree with her now.

What I'd like for deficits is an Evans Rule.

What does that mean? Late last year, the Federal Reserve adopted a proposal by Chicago Fed President Charlie Evans, who said our central bank should announce that it won't tighten monetary policy until unemployment fell under 6.5 percent (or inflation rose to 2.5 percent).

Once unemployment hits 6.5 percent, I'll root for Washington to sit down at a table with Rivlin, whose deficit reduction plan with the Bipartisan Policy Center was a nice framework for a balanced approach to long-term deficit reduction. Until then, attention paid to the future deficit crisis is attention not paid to the current jobs crisis. I wish that weren't the case, but it is.

Rivlin says she hopes Washington can pass a long-term deficit-reduction budget that preserves high deficits today to protect the recovery. But recent history suggests Washington lacks the will or the faculty to be so bifocal. The Budget Control Act is law, and it cuts the debt by about $1 trillion. The sequester is law, it cuts the debt by about $1.2 trillion. The American Jobs Act and its multi-billion-dollar stimulus? Gone in a blur. The president's budget asking for hundreds of billions of dollars spent right away? Hardly considered, easily forgotten.

Since we started talking about high deficits today and low deficits tomorrow, we've just gotten lower deficits today. Washington would like to think it could walk and chew gum at the same time. It can't.

The sooner the economy recovers, the sooner I'll go from agreeing with Alice Rivlin 50% to agreeing with her 100%.