Deficits and Debt: Reischauer’s Testimony is a Must-Read
Those who seek a crisp primer on why experts worry about rising deficits and debt should look no further than this morning’s testimony before the President’s fiscal commission by Robert Reischauer, the former Congressional Budget Office director and a member of the Center’s Board of Directors.
“Recently the public has shown increasing concern over large deficits and the growth of federal debt. But it is clear that few Americans fully understand the seriousness of the problem, the consequences of inaction, or the degree of sacrifice required to ensure that our children and grandchildren enjoy, as we have, an economy that provides rising incomes and expanded opportunities.”
Moreover, he added:
“If we do not begin these adjustments soon, our economy’s vitality will gradually be sapped, our ability to chart our own course in this increasingly unstable world will erode, our government’s capacity to meet crises and address emerging priorities will be constrained, and our dependence on foreign creditors and their influence on our policies will grow. The longer we delay, the greater the risk of catastrophic economic consequences.”
As for the steps needed, he explained that:
“The magnitude of the required adjustments is so large that spending cuts will have to affect programs we all care about and benefit from and revenue increases will have to come from a wide swath of Americans. In other words, raising taxes on the rich or corporations, closing tax loopholes, eliminating wasteful or low-priority programs, and prohibiting earmarks simply won’t be enough.”
More specifically on the tax side:
“to achieve fiscal sustainability we are going to have to accept higher tax burdens than we have enjoyed in the past. The challenge will be to adopt those revenue enhancing measures that are most compatible with economic growth and equity.”
But, Reischauer made clear, this can be no slash-and-burn exercise. We must be sensitive to the services that major programs provide and the factors driving their growth. For instance, on health care, whose costs are the single biggest driver of long-term deficits, he noted that big savings in federal health programs may not be possible over the next decade due to broad trends in health care system-wide and also to new responsibilities that Congress gave federal health programs under the recent health reform law. Longer term, of course, the key to slowing the growth in Medicare and Medicaid spending is to slow the growth of costs across the health care system.
It’s sober reading – just what the commission needs to hear as it begins to address the challenge of crafting a plan by year-end through which the President and Congress can restore fiscal sanity.