Oct 27, 2010
Welcome to Fiscal Future Daily, the new update from the Choosing Our Fiscal Future initiative. Our nation’s budget is on an unsustainable path, and we’re heading into a critical period in deciding what to do about it: a new Congress will be elected next week, a presidential deficit commission is set to report soon, and we’re going to have to decide on key issues like extending the Bush tax cuts by the end of the year. It’s a lot. Fiscal Future Daily is here to help: we want to sum up the budget debate from all points of view, put it in context, and expand the debate. We believe there are practical solutions to our budget problems, no matter what your political views (the Fiscal Future report set out four different approaches to making the budget sustainable).
Fit the Budget to the Values, Not the Other Way Around
From the Public Square blog on Our Fiscal Future: At its heart, the federal budget isn’t about money. It’s about values. Sure, a panel of experts or a presidential commission can come up with ways to make the books balance. But the federal budget is an expression of what we value as a nation, and what our priorities are. What the government spends, how much we pay, and who gets taxed to do it, says something about what’s important to Americans. Read the full post here.
What Happens Next
Lori Montgomery, in today’s Washington Post, takes a look at the post-election prospects for fiscal responsibility, a view not quite as gloomy as the one in yesterday’s The New York Times. She points out some potential flexibility on taxes and Social Security, but the central assessment still comes down to this:
“In interviews, however, Republicans and Democrats both say progress on the deficit depends heavily on the other side’s willingness to compromise – and there are strong countervailing winds against that. On Tuesday, Democrats are expected to lose many of their most conservative members, leaving a more liberal bloc likely to oppose reductions in Social Security benefits and other spending. Republicans, meanwhile, are likely to find their ranks fortified by tea party conservatives strongly averse to taxes and deals with Democrats.”
Elections Put New Focus On Government Spending
Michael Tanner in National Review Online says Republican candidates will have to do better than their campaign promises if they’re going to get anywhere on the budget:
“During an election campaign, it is perhaps understandable if candidates avoid specifics when talking budget cuts. After all, every program has a constituency that would be alienated by proposals to cut it. But when Republicans turn from campaigning to governing, they are going to have to make cuts that will offend powerful voter groups. Cuts of the size necessary to balance the budget are going to hurt — simply cutting the usual “waste, fraud, and abuse” isn’t going to get there.”
After November 2
Looking at next week’s election, and conservative calls to cut spending without touching tax rates, econoblogger James Kwak takes on four deficit hawk arguments outlined by Robert Pollin’s Political Economy Research Institute paper. It’s an economist’s take on the talking points, and he’s particularly sharp on effects on business confidence and economic stagnation:
“Not only is there a risk of stagnation, we have stagnation right now – just ask all the people without jobs. In the long term, confidence in the ability of the Treasury to pay off its debts is based on expectations about the future performance of the U.S. economy (since the economy is the tax base), and the bigger worry right now should be economic growth.”
Kwak does join the worry about skyrocketing healthcare costs and the deficit, but argues that “the answer has to be curbing healthcare costs in general, not just the government’s share of those costs, because otherwise you’re just shifting the risk onto people who cannot afford to bear it.”
Ezra Klein, in The Washington Post, points out that one of the problems we face is that most of the potential solutions to the budget, like health care reform and changing the mortgage deduction, will phase in slowly, which means that Congress has to be credible when it makes long-term commitments:
Can the Market Trust Gradual Deficit Reduction?
The View from Europe
Most European countries have been struggling with their rising national debts all year. The United States has a long, long way to go before our fiscal problems become anything like the crisis facing countries like Greece, but it’s still worth tracking European efforts to cut back on deficits and keep their lenders happy.
Budget cuts in Britain have been getting most of the attention, but The Atlantic notes that Britain is adopting a carbon tax, an idea environmentalists like because it both raises revenue and discourages the use of fossil fuels.
Yet a survey of bondholders finds many of them are still skeptical. The good news? Few expect a full-on debt crisis that could resonate throughout the world economy.
People You’ve Never Heard of and Medicare
The Wall Street Journal reports on a committee of doctors that has enormous influence over how much Medicare pays for services. And as Medicare costs go, so does the rest of the federal budget – rising health care costs will be driving much of our fiscal problem.
Physician Panel Prescribes the Fees Paid by Medicare
Chart of the Day
The Choosing Our Fiscal Future report called for stabilizing the national debt at a target of 60 percent of GDP. This chart shows what that could mean when it comes to the national debt.
Fiscal Future Daily is produced by Public Agenda for Choosing Our Fiscal Future, in partnership with the National Academy of Public Administration and with support by the John D. and Catherine T. MacArthur Foundation.