Budget Reform

The Unsustainable Debt Trajectory

For decades now, we have known that the United States faced serious long-term fiscal challenges. The aging of society and growing health care costs have led to projected unfunded liabilities in the double-digit trillions of dollars that were clearly unsustainable. Year after year, the long-term fiscal challenges were discussed, but the political hurdles needed to take action were just too high, and changes were delayed.

What happened!? Just two weeks ago we were celebrating the willingness of the political class -- or at least an influential subset of it -- to finally get realistic and confront the nation's fiscal challenges.

The remarkable success of President Obama's fiscal commission came as a welcome surprise. The panel came up with an outstanding budget reform proposal that could put the U.S. budget on track and reassure credit markets.

It is gratifying to see the growing number of plans to address the federaldebt. The recent proposal from the Co-Chairs of the President’s National Commission on Fiscal Responsibility and Reform (Fiscal Commission), the Debt Reduction Task Force plan, Esquire’s Commission to Balance the Federal Budget, Bill Galston and Maya MacGuineas’ proposal, Rep. Paul Ryan’s (R-WI) Roadmap, and the plan from Rep. Jan Schakowsky (D-IL) all dig deep into the budget to recommend ways to bring down future federal deficits and debt.

It's not every day that the country receives some encouraging news on the deficit and debt front. But Wednesday just so happened to be one of those days.

In the search for possible reforms, increasing the retirement age is a no-brainer. Doing so would help control spending in Social Security and Medicare, bring in more revenues without raising taxes and help the economy grow.

Gradually pushing up the retirement ages (currently 65 for Medicare, and 66 for Social Security — headed slowly to 67) to 68 and then indexing them to life expectancy would generate hundreds of billions in savings over the next few decades.

The draft plan released last week by the co-chairmen of President Obama's fiscal commission started an important conversation.

The plan would cut defense and domestic discretionary spending, end most tax breaks while lowering rates and reduce health care spending. It would make Social Security solvent by raising the retirement age, lowering benefits on the upper end and raising taxes. It would also increase the gas tax.

All are good ideas. Guess what? The critics are circling.

Elections in democracies are supposed to be instruments through which citizens pick their leaders and send them their marching orders. But not in California. After a year of campaigning and millions of dollars spent on electioneering, Sacramento will remain stuck in quicksand, with no immediate prospect of rescue.

Welcome to the job! Uh, I think. Of course, Republicans must be thrilled to have taken back the House and all.

But let's get real, at times like these, being in charge isn't all that fun. And if you do it right, it will be really tough. So assuming you don't want to call for a recount ...

My advice comes from someone terribly worried about the fiscal direction of the country. I don't care which party holds the majority. Consult your political advisers for the other side of what I am about to suggest.

The Brits sure did mean it when they promised a tough fiscal austerity plan. Man, the difference between our two governments' ability to act when necessary is depressing. It sure would be nice to have a parliamentary system at a time like this.

The U.K. coalition government last week spelled out spending reductions that average 19% across all agencies over 4 years. That's 500,000 public-sector jobs. Little is spared. Housing benefits and education funds will be cut. Defense will be pared 8%. The cuts go on.