When it comes to how Washington has reacted to the debt crisis we face, pundits have talked about the “small ball” approach, where Congress and the president act at the 11th hour of a fiscal crisis by passing legislation that simply pushes the crisis off for a few more weeks or months at best. That’s a generous description of what has happened in Washington—“no balls” would be more like it. And no approach better represents the no-balls mentality than those on both sides of the aisle who say we should simply let sequestration occur.
Sequestration was intended to be so draconian and mindlessly senseless that it would force parties on both sides of the aisle to act to avoid it occurring. Allowing it to occur is tantamount to abdicating the responsibility to make tough choices and set priorities. The sequester cuts muscle and fat equally, disproportionately impacts discretionary programs for national security and investments in the future, and makes disruptive cuts now while the economy is still weak while doing very little to reduce the long-term growth in the debt.
It is time for our leaders in Washington to go big.
The facts are not in dispute, and they aren’t pretty. Our nation’s budget is on a fiscally unsustainable course, with debt growing faster than our economy and spending on entitlements and interest on the debt crowding out all other priorities. The fiscal-cliff deal and other recent deficit reduction efforts did nothing to change that fundamental trajectory—and neither will simply allowing sequestration to occur.
We need a comprehensive approach to achieve the amount of savings and fundamental reforms that are necessary to put our budget on a fiscally sustainable course and establish a strong foundation for economic growth.
The good news is that we can act, and there is way forward. Republican Main Street Partnership, the centrist organization that I now head, released a white paper (PDF) this month outlining a potential path forward, based on several different bipartisan deficit reduction plans, including the Simpson-Bowles commission. While there were differences in details, there were several common elements in all of these plans, which should be a part of the way forward for Washington.
Discretionary Spending Cuts
House Democratic leader Nancy Pelosi recently said that we don’t have a spending problem in Washington. She is dead wrong, and any plan to address the debt must have significant spending cuts as part of it. Spending cuts need not be achieved through mindless sequestration, indeed spending cuts should be done smartly—with an eye always toward cuts that will help grow, rather than shrink, our economy.
Our nation’s budget is on a fiscally unsustainable course, with debt growing faster than our economy and spending on entitlements and interest on the debt crowding out all other priorities.
Debt reduction that focuses only on discretionary spending and taxes but ignores entitlements is the proverbial two-legged stool. No matter how hard you try, cutting discretionary spending and increasing taxes will never be enough to deal with our debt crisis.
We need entitlement reform that focuses on making these programs financially sound and restrains their long-term growth. Without meaningful entitlement reform, any increase in revenue through higher taxes will simply be eaten up by future entitlement growth.
In particular, we need to control the long-term growth of health-care costs covered by Medicare and Medicaid. We need structural reforms that encourage efficient and effective delivery of care. Social Security should also be reformed to ensure it is strong for future generations.
Additional revenues need to be part of a comprehensive plan, but we need to be honest—we can’t tax our way out of this hole. We need additional revenue that comes from fundamental tax reforms. While it might not fit on a bumper sticker the same way “soak the rich” might, the truth is that we need tax reform that will not only raise revenue, but that also lowers rates, broadens the base, and simplifies the tax code. Such reforms will not only raise revenue, but also increase American competitiveness in the global marketplace and create jobs.
The savings achieved through this combination of spending cuts, tax reform, and entitlement reform must be large enough to not just stabilize the debt—as some have argued—but to put it on a clear downward path. We can not simply do enough to keep debt hovering at the dangerously high level it is at. By doing so we leave ourselves no room for error and no room to respond to unforseen emergencies that we may be forced to confront. Instead the savings achieved must be large enough to actually put the debt on a path where it actually decreases as a percentage of GDP.
Washington can and should do better than simply sitting back and doing nothing—allowing what was once the unthinkable (sequestration) to occur simply because they lack the courage to do something about it. It is time for our elected officials in Washington to do their job, work together, and compromise.