Other CRFB Papers

My View: Declaring Fiscal Independence

Mankato Free Press | July 2, 2009


As we prepare to celebrate the Fourth of July, many Americans are beginning to wonder whether we’ll ever be independent of the huge financial debt our nation is amassing.
 
That’s because our federal government, in response to the current economic crisis, has pledged trillions of dollars in the form of loans, credits, and outright grants (all handily accounted for now at www.stimulus.org). This federal money is all intended to stimulate the economy and pave the road to recovery.
 

But now doubts are surfacing about the federal government’s response to the recession. According to a recent Wall Street Journal/NBC News poll, less than half the country believes the controversial stimulus package will pay off. The poll found that independent voters, in particular, “are developing gnawing fears about government spending” and that “a solid majority — 58 percent — said that the president and Congress should focus on keeping the budget deficit down, even if takes longer for the economy to recover.”

As always, the American people are savvy. They are right to see that America is taking on unprecedented levels of debt — even as bigger long-term fiscal problems with Social Security, Medicaid and Medicare threaten to darken our years ahead. These entitlement programs are currently unsustainable, and must be reformed if the U.S. is to avoid yet another major fiscal crisis. In fact, earlier this week the Congressional Budget Office (CBO) released long-term projections that were considerably worse than previous predictions. CBO’s new projections warn that deficits will hit 7.5 percent of Gross Domestic Product (GDP) by 2020, almost 15 percent by 2035, and well over 40 percent by the end of the 75-year budget window — if we continue current spending policies. Deficits — and the ensuing debt — of this magnitude will cripple our economy and punish future generations. We must not let this happen.
 
To set a more responsible course, we need to declare our independence from deficit spending. In order to do so, we must rely on common sense principles for governing and budgeting. Here are four simple principles for our elected leaders to consider and adopt.
 
1) Stop borrowing. If something is important enough for the government to do, it is important enough to pay for it either by raising taxes or cutting other spending. That means having the courage to make tradeoffs. Lawmakers may be able to pay for some part of their agenda through reducing waste, fraud, abuse — but that’s not the heavy lifting these times require. Set priorities.
 
2) Be honest with the numbers. Thomas Jefferson wrote that honesty is the first chapter in the book of wisdom. Our leaders must calculate the costs of new initiatives and their tradeoffs fairly and honestly. It will only make matters worse in the long run if we use misleading assumptions about costs or savings — or, worse, rely on budget gimmicks. Don’t play games.
 
3) Plan ahead. Look to the future and anticipate the costs of the babyboom retirement. We know that before long there will be twice as many retirees drawing Social Security, Medicare and Medicaid benefits. That alone will explode the cost of these programs well beyond the taxes being collected to support them. Begin now to enact policy changes (perhaps delaying the retirement age or capping COLAs?) that can be phased in over time. Be fair to the younger workers who will otherwise bear the burden of higher taxes to support these programs. Get ahead of the curve.
 
4) Reach across the aisle. Solutions to today’s (and tomorrow’s) budget challenges will not be easy. And, solutions will not be possible if both political parties simply point fingers and place blame. It may be true that in recent years neither party has demonstrated the will to be truly fiscally responsible. But, that must change — and both parties need to take responsibility and contribute their best ideas to get our fiscal house back in order. Work together.
On Independence Day, we celebrate leaders who demonstrated uncommon courage and foresight. In order to maintain our fiscal independence, we need to see a bit more courage and foresight from today’s leaders.
 
 
Former U.S. Rep. Timothy Penny is the co-chairman of the Committee for a Responsible Federal Budget, a nonpartisan budget watchdog group in Washington DC. More at www.crfb.org.
 

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