Washington, D.C., has spent the past three years obsessing about debt. While there were good reasons to worry about deficits and debt three years ago, many of those reasons have dissipated. Three years ago, the Congressional Budget Office projected that deficits would exceed 8 percent of gross domestic product by 2023. Today, deficits are projected to be 3.5 percent of GDP in 2023 without the automatic “sequester” spending cuts; with them, deficits will be even lower.
At the same time that the budget picture has been improving, we have been missing the mark on the broader economy. Unemployment is a full percentage point higher this year than the CBO predicted it would be by now, while total economic output is 5 percent lower.
Washington’s relentless focus on deficit reduction has made it harder, not easier, to create good middle-class jobs and boost economic growth. In a rational world, Washington would be able to work simultaneously on bringing down the long-term debt and creating good jobs now. But the past three years have proved that lawmakers are not very good at walking and chewing gum at the same time. We’ve enacted nearly $4 trillion worth of deficit reduction since 2010 – when the sequester is included – but few policies to help the economy grow.
Washington deficit hawks don’t dispute that the budget picture has brightened or that the economic picture remains too dim. But they worry that by focusing on the more immediate economic challenges, we are walking away from long-term deficit reduction and entitlement reform. The Washington Post’s Fred Hiatt, for example, recently wrote that “If liberals succeed in blocking any serious entitlement reform during the Obama presidency . . . they will have handed the conservatives a gift.” Where that analysis goes wrong is that liberals aren’t the ones blocking entitlement reforms. Conservatives are.
Indeed, liberals have been leading on entitlement reform as part of a balanced approach to deficit reduction for the past four years. The Center for American Progress offered a detailed plan to reform Social Security that would achieve 75-year solvency while making the system more progressive and stable, and eliminating its gender inequity. We also offered a Medicare plan that would continue to reduce costs for the federal government, saving $385 billion over 10 years, without shifting those costs onto middle- and low-income beneficiaries, businesses or states. These are good ideas, and Congress should pursue them.
But consider all the instances over the past three years when the president has attempted, unsuccessfully, to get conservatives in Congress to agree to a bargain that includes serious entitlement reform. Most recently, the president’s 2014 budget included both health care and Social Security reductions, again signaling his willingness to make substantial changes to entitlement programs.
The contrast between the president’s eagerness to bargain and Rep. Paul Ryan’s successive budget plans – each one with more spending cuts and ways to privatize Medicare than the last – is hard to miss. This has been the pattern for three years. Liberals repeatedly try to compromise while conservatives move even further right.
Despite having no viable partners for compromise, deficit hawks insist that liberals must continue to pursue entitlement reform because, they say, without it health care and retirement costs will crowd out progressive priorities. But the relentless pursuit of deficit reduction is already crowding out progressive priorities. Federal funding for education, science and technology, infrastructure and a broad swath of other basic public services is on track to decline to just 2.7 percent of GDP by 2022 – lower than at any point in the past 50 years. And that path is the direct result of repeated spending cuts to so-called discretionary programs that were made possible only by the perceived imperative of deficit reduction. Indeed, the sequester is the product of an attempt to force a grand bargain.
Furthermore, there is no inherent tension between safeguarding a dignified retirement for seniors and investing in young people and future prosperity, as the center’s deficit-reduction plans have repeatedly shown. That stark trade-off exists only because conservatives have refused to consider any serious revenue enhancements.
Perhaps deficit hawks should focus their ire not on liberals but on congressional Republicans who refuse to adopt a balanced approach to long-term deficit reduction. Until that happens, we can’t allow economic growth to be held hostage to the seeming mirage of a grand bargain. That’s why the center has proposed a responsible, manageable plan to get rid of the sequester for the next three years while making commonsense investments in jobs and growth.
Yes, the nation still has a long-term deficit challenge. And, yes, entitlement reform will have to be part of the solution. But rebuilding a strong economy with a vibrant middle class is an urgent problem today, not 10 years from now. Washington has been focused on deficits, not growth. It’s time to shift that focus.