The new president will face many challenges, but the critical budget problems of our country top the list. The economy is likely to still be in recession. The continually increasing national debt will serve as handcuffs to his promised agenda.
Confronting these challenges will not be easy; ignoring them puts the health of the country at grave risk.
The new president will first have to get the economy under control. This may require further fiscal stimulus, but he should ensure that any package is not filled with fiscal pork. All stimulus measures should be temporary to avoid digging ourselves deeper into debt down the road.
Second, the new president will have to deal with the budget deficit. Ongoing deficits hurt all of us. The continued borrowing by our government crowds out private investment, which in turn causes slower economic growth. Deficits also harm future generations by allowing politicians to initiate new spending programs and provide tax cuts for current workers, while sending the bill to our kids. And deficits leave us vulnerable to our foreign lenders, who are gaining an increasing amount of influence over U.S. policy.
The budget plans of both Senators McCain and Obama would increase rather than decrease future deficits. The Committee for a Responsible Federal Budget analyzed the impact these policies would have at the end of the next president's first term in our Voter Guide, “Promises Promises: A Fiscal Voter Guide to the 2008 Election.”
Our analysis shows that both candidates would increase the deficit by more than $200 billion a year. Given the new debt levels in the United States –– the national debt just broke $10 trillion –– this will not fly.
Both Senators McCain and Obama are realistic men who know we cannot keep up this seemingly insatiable appetite for spending and cutting taxes. Campaigns may not always be the best time for delivering bad news, but the honeymoon period afterward will require straight talk with the American people.
The new president will need to submit a budget plan that phases out the deficit over a reasonable amount of time. That might be five years, it might be 10, but what matters most is that the plan is credible. This will require shelving many of his priorities until the budget is in better shape to accommodate new tax cuts and spending.
The new president will have to work with Congress to get his plan passed. This will require the development of a bipartisan plan that reflects the goals of both parties, so that no single party gains or loses from the making of tough choices.
Lastly, taxes also have to be on the table. Both candidates promised over $350 billion in annual tax cuts. The unfortunate truth is that tax increases are in the future, and the smartest approach to dealing with the inevitable is to consider how to simplify and modernize the tax code in a way that could bring in more revenues without harming the economy.
The work does not stop there. The major fiscal threats of Social Security and healthcare costs were not discussed enough during the campaign. Reforms will have to be made, growth in benefits will have to be slowed, and raising the retirement age should probably be considered.
This is not exactly the job the new president signed up for, but this is the card he was dealt. Ignoring our burgeoning budget problems could lead to the next economic crisis. The first test of real leadership will be whether President McCain or President Obama confronts these challenges head on.
