Highlights from Bill Frenzel's Brookings Web Chat

CRFB co-chair and former congressman Bill Frenzel answered questions on the U.S. budget deficit in a web chat today hosted by The Brookings Institution. Here are some highlights:

Q: Why does it matter what the government spends. Doesn't the government print the money anyway?

A: Unfortunately, when the government spends more than it takes in, and prints the money that makes up the deficit, the value of the US currency declines, and this becomes an extra tax on everyone, especially the poorest of us.

Q:  Why aren't more people worried about the expanding deficit?

A: The reason is that Americans have been lulled into a false sense of security by their elected representatives who have lead them to believe there is no tomorrow. Eventually, the bills have to be paid by our children and grandchildren. And at that time, the standard of living for all of us will be lowered. The public is just beginning to get the idea of how bad the problem is.

Q: With all of our domestic and international obligations, where do you recommend spending cuts?

A: I recommend spending cuts in every item of the budget except interest and certain foreign treaty obligations. I believe everything has to be scrutinized including defense, domestic discretionary spending, and entitlements. Entitlements now make up about 2/3 of our annual expenditures. If we can't cut them, we can never balance the budget.

Q: Given the other issues on his plate, how important is it for President Obama to lead on the budget deficit? I always thought Congress had the power of the purse. Couldn't they solve this themselves with pay-as-you-go rules and some Medicare reforms?

A: Congress does have the power of the purse but it invariably needs presidential leadership to do its job property. I believe that solving the deficit problem is so far ahead of all the other problems that confront us, that it ought to be the #1 priority of this president or any other. Reducing the deficit will take cooperation, and courage, factors totally absent from the political scene today.