That depiction comes as no surprise to those Americans who have turned our public borrowing into one of the year’s top political issues. But it can’t hurt to have a committee appointed by President Barack Obama reiterate the painful truth.
But setting the table, so to speak, for a frank discussion about the national debt is all the commission members can do. Only Congress and the president can actually make budget law to alleviate the problem.
So, it’s important that the issue is framed appropriately. Conservatives were skeptical about this blue-ribbon panel because it’s likely to be a.) a fig leaf for inaction; or b.) political cover for something Democrats want to do anyway — raise taxes.
To that end, it was somewhat heartening to hear one of the co-chairs, former Clinton staffer Erskine Bowles, suggest that “we can’t tax our way out” of this problem. He hinted at a plan along the lines of Britain’s new austerity budget, which seeks to make up three-quarters of that country’s gap with spending cuts and just one-quarter with tax increases.
A 3:1 ratio of spending cuts to tax increases may sound horrifying to big-government liberals, but the right also may be alarmed. Done badly, even a comparatively modest move to raise taxes could be disastrous.
With that in mind, here are some principles to guide any tax/spend compromise:
1. There’s a difference between deficits and debt. A deficit is the shortfall in any one year’s budget; debt is the compilation of deficits over time.
We don’t need to raise taxes to shrink the deficit. Government should spend within its means. Eliminate the deficit with spending cuts.
Do that, and we can talk about taxes dedicated to paying down debt. Bowles reported last weekend, when he and co-chair Alan Simpson met with the nation’s governors in Boston, that interest payments on the debt alone could reach $2 trillion a year by 2020. If so, it’s better to pay down that debt now than to pay out more to keep financing it later.
2. Don’t let Congress keep increasing spending at will. When economic growth returns, revenues will increase. Part of our debt problem is that rising revenues traditionally inspire Congress to spend even more.
Some states have kept their legislators in check by limiting spending growth via a formula — often a combination of population growth and inflation. There’s no reason Congress couldn’t do the same thing.
If revenues rise faster than spending does, great — dedicate the overage to debt payments, or refund it to taxpayers with a broad-based tax cut.
3. No new taxes. Meaning, no new kinds of taxes.
No new value-added tax or other consumption tax (barring the full repeal of the 16th Amendment — which, sorry to say, Fair Taxers, is unlikely). No new carbon tax.
New taxes never die off, they just go to pay for other desires in Washington.
If we are going to pay down debt with taxes, do it with existing forms of taxation, whose rates can be raised for that temporary purpose. And do it in a way that creates the least harm possible: For example, dropping the mortgage-interest deduction, as Bowles and Simpson floated, could be lethal to a housing market recovery.
4. End it at some point. Pick a certain level of debt that’s considered manageable, probably represented as a share of the economy. Once the debt reaches that point, re-lower taxes.
If these sound like a hard line, well, they are. But if we’re serious about reducing debt and deficits, they’re also more than reasonable.
P.S. — I am spending Wednesday and Thursday traveling with gubernatorial candidates as they campaign to gather material for this weekend’s column. So this post will have to tide y’all over until Friday.