Face To Face With The Deficit

At least you can't say the federal budget is a back-burner issue anymore. With President Obama projecting an unprecedented $1.75 trillion deficit and proposing significant changes in taxes and spending, you couldn't ignore the nation's budget problems if you tried.

Any analysis written on the first day that a complicated budget is put out should be viewed with caution. There's a lot yet to be written about the proposal (the official documents are here, and there are several good stories like this and this). That said, there are a few points to keep in mind as this unfolds.

You've got to mix it up. The nation's fiscal problems are so huge that the only way of coping with them is by raising revenue and making cuts. You can't do it with all one or the other without resorting to truly draconian measures: imposing either enormous tax burdens or slash-and-burn cutbacks. You can always argue about the proportions, and people are already questioning whether the Obama administration's cuts are really cuts. Fair enough. But both options have to be in the mix.

President Obama is proposing at least some moves to pay as he goes, but whether this works will depend on whether he can get Congress to go there with him. And if they don't want to go along, Congress should have its own alternatives. It's okay to block a bad idea, but there ought to be a better idea lined up. We can't afford stasis.

The president wants to pay for health care expansion with a combination of upper-income tax increases and Medicare cuts, and is counting on revenue from a new "cap-and-trade" system to limit greenhouse gases. Both health care and climate change have extremely complicated political dynamics of their own, but it's worth remembering that what happens on those issues will have a huge impact on federal finances.

We've got two problems, short-term and long-term. The short-term problem is the deficit, which is enormous and legitimately scary. The long-term problem is entitlement spending for the boomers which, as amazing as it might seem, is even scarier. Right now, nobody's anticipating a $1.75 trillion deficit to be the permanent state of affairs. Presuming that the economic stimulus and the financial bailout are temporary measures, and also presuming that the economy recovers, the deficit should decline from unfathomable to merely horrible. Even President Obama's vow to cut the deficit in half by four years, however, only puts us back in the "horrible" range.

The fact is that the federal government has been living beyond its means for decades, and thanks to the financial crisis, it can't stop anytime soon. But it has to at least put the budget on the right track to be under control eventually.

The long-term problems, of course, are the "entitlements" - Medicare and Social Security. The twin trends of rising health care costs and shifting demographics are going to make these programs a staggering burden unless something is done. The Obama administration has chosen to go after the health care part first. But that is a critical part of any discussion about expanding health coverage: in the long run, rising costs have to be brought under control; otherwise none of this is sustainable.

In the end, it's about the public. As you know, Public Agenda is in the civic engagement business, and we've been watching the Obama administration's early moves on public involvement. This is going to be an important test of their approach. The federal budget has always been an inside-the-Beltway problem. Political leaders mostly give the public promises and applause lines, telling people what they want to hear rather than what they need to face.

If we're going to solve these problems, that has to change. The public simply will not permit Washington to raise their taxes, change their health insurance, or cut programs without their consent. Nor should they. But the public should understand the rules, too. It's not enough to complain about red ink and then reject any possible solution. The public's fully capable of grappling with difficult options, if given the chance.

So if we're going to make the public part of the solution to this challenge, now would be an excellent time to start.