It's all deficits all the time in the headlines today. Some worthwhile reads:
1) Our friends at the Committee for a Responsible Federal Budget have finally suggested that we ought to have a plan to pay these deficits back, sort of:
The challenge is how to best meet the seemingly contradictory goals of providing the economy with sufficient stimulus, yet doing so in a fiscally responsible manner. The answer is to continue with stimulus policies as necessary, but, in order to regain the country's fiscal credibility, to promptly develop and announce a plan to reduce the deficit and close the long-term fiscal gap. This plan would be implemented as soon as the economy is strong enough to absorb it.
Welcome to the party, folks. Being fiscally responsible means always having such a plan and being as willing to articulate it as you are to augment the automatic stabilizers already in the budget during a downturn.
2) Alan Auerbach and Bill Gale announce, "Here Comes the Next Fiscal Crisis" in Wednesday's LA Times. I think the last sentence is a step forward:
The nature of our short-term problem is evident to all of us, as workers anxious about the future of our jobs, as homeowners worrying about the declining values of our houses, and as Californians wondering whether our state government can still function. The longer-term problem, though, is less apparent to most of us, and its more subtle nature has, until now, left our political leaders with little incentive to act.
There are two parts to the problem. First, over the next decade or so, even once we recover from the recession, federal revenues will fall far short of federal spending. Under the policies laid out in the Obama administration's recent budget, for example, the annual deficit will be 5.5% of GDP by 2019, an exceptionally high share in normal times. In the meantime, the national debt will accumulate so rapidly that it will stand at 82% of GDP, its highest mark since 1948, when we were paying off our war debts.
And we will be looking ahead to even larger deficits and faster debt accumulation. That's because of the second element of the problem, the rapid growth of our "big three" entitlement programs: Social Security, Medicare and Medicaid. Due to an aging population and ever-increasing medical costs, these programs are growing much faster than the tax revenues we have to pay for them.
These realities aren't news, although the Bush administration's policies of massive tax cuts and increased spending on all fronts made these underlying problems substantially worse. Recent developments, however, have made ignoring the situation much harder.
I hope that by the last line, the authors mean to implicate some of the spending decisions of the current administration and its allies in Congress in the size of the deficits in 2019. As they indicate, the economy is not projected to be in a recession that year. So why the deficit of 5.5% of GDP? Are we really going to continue to blame it on the policies of the last administration? I agree -- fiscally, they were detrimental -- but they can all be changed at this point. Democrats control the House, the Senate with a filibuster-proof majority, and the White House. Let's see what they do with them.