Wake Up, America
Samuelson, Robert J., Newsweek
Why we must balance the budget.
You might think that Europe's economic turmoil would inject a note of urgency into America's budget debate. After all, high government deficits and debt are the root sources of Europe's problems, and these same problems afflict the United States. But no. Most Americans, starting with the nation's political leaders, dismiss what's happening in Europe as a continental drama with little relevance to them.
What Americans resolutely avoid is a realistic debate about the desirable role of government. How big should it be? Should it favor the old or the young? Will social spending crowd out defense spending? Will larger government dampen economic growth through higher deficits or taxes? No one engages this debate, because if rigorously conducted, it would disappoint both liberals and conservatives.
Confronted with huge spending increases--reflecting an aging population and soaring health costs--liberals would need to concede that benefits and spending ought to be reduced. Seeing that even after these cuts total government spending would still rise (more people would receive benefits, even if benefit levels fell), conservatives would have to concede the need for higher taxes. On both left and right, true believers would howl.
The lack of seriousness is defined by three missing words: "Balance the budget." These words are taboo. In February, President Obama created a National Commission on Fiscal Responsibility and Reform (call it the deficit commission). Its charge is to propose measures that would reduce the deficit to the level of "interest payments on the debt" by 2015 so as "to stabilize the debt-to-GDP ratio at an acceptable level."
Understand? No? Well, you're not supposed to. All the mumbo jumbo about stabilizing "debt-to-GDP" and ignoring interest payments are examples of budget-speak, intended to convince people that "something is being done" when little, or nothing, is. For instance, Obama's target for 2015 implies a deficit of $500abillion, despite a strong economy (unemployment: 5.1 percent). The commission is also supposed to "propose recommendations that meaningfully improve the long-run fiscal outlook," whatever that means. But balance the budget? There's no mention.
In a classroom, limiting government debt in relation to GDP can be defended. …