MY VIEW: Pete Peterson
In today's Politico, CRFB board member and former Secretary of Commerce Pete Peterson calls for a long-term solution to our national debt, which addresses the drivers of our debt, protects the vulnerable, and encourages economic growth.
Similar to what we’ve written previously, he makes the case that sustainable fiscal policy is the path to a favorable legacy for future generations. To get there will require both parties to work to compromise.
On the problem, he writes:
[We will face] a slow-growth crisis, in an economy that is starved of badly needed investments. Over the next quarter-century, even if interest rates rise only to historically average levels, interest costs on public debt are projected to soar to about four times the total federal investment in R&D, education, and non-defense infrastructure combined. Those of us who believe more investment is needed in this technological and competitive global economy also have a responsibility to advocate for policies that ensure we have the resources to pay for it.
Peterson makes the argument that addressing three major areas are required to solve the problem: defense, taxes, and entitlements. Moreover, he says that both ends of the political spectrum will have to make uncomfortable compromises in these areas:
On taxes, Republicans must acknowledge the need for additional revenue to achieve a lasting bipartisan solution. Simple math makes any reform package without revenues not only draconian, but politically impossible. Relying solely on spending cuts to stabilize debt at sustainable levels would require cutting nearly one-third of the overall budget. Tax reform that raises revenue by reducing deductions would be economically beneficial and more feasible politically.
At the same time, President Obama should lead his fellow Democrats — and the entire nation — to solutions that tame the growing costs of Medicare, Medicaid, and Social Security. With rising health care costs and 78 million Baby Boomers retiring, these programs account for 100 percent of the projected long-term increases in federal non-interest spending.
On the solution, Peterson argues for an alternative to hasty, across-the-board cuts we see in the sequester.
First, we simply must preserve the safety net for the vulnerable. Reforms should start by asking the relatively well-off to contribute more and receive less. And those who advocate for the status quo must remember that doing nothing is the worst thing we can do for low-income families — without reform, we’re headed toward an economic and political crisis in which no program is safe.
Second, retirees need time to plan for policy changes. Our leaders should agree now on reforms to Medicare and Social Security, so that people have time to prepare. Of course, entitlement reform that exempts those nearing retirement requires that we reach an agreement now—we can’t afford to delay both the decision and the implementation.
By making smart, phased-in reforms and investments, we can help boost the recovery rather than hinder it:
The suggestion that Washington should focus on economic recovery today and long-term debt reduction later presents a false choice. Our leaders can walk and chew gum at the same time. And entitlement reform with delayed implementation by definition won’t harm the recovery. To the contrary, a comprehensive plan that stabilizes long-term debt would generate much-needed confidence in all sectors — business, consumer, financial markets — that would in turn stimulate the short-term economy.
Ultimately, I believe the most persuasive argument for addressing long-term debt is moral. If we do nothing, we will leave more than $50 trillion of unfunded promises on the backs of our children and grandchildren over the next 50 years.
To read the full op-ed, click here.
"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.