How to fix the debt
The following editorial appeared Friday in the Los Angeles Times:
Chief executives of more than 85 major U.S. corporations jumped into the debate over the federal budget mess Thursday, calling on Washington to put its fiscal house in order by raising tax revenue, cutting spending, controlling the growing cost of healthcare entitlements and assuring the sustainability of Social Security.
They endorsed a set of principles, not specific policy proposals, and they tiptoed around the question of how to take the steps they've recommended without damaging the fragile economy. But the path they charted is the same one that a growing number of bipartisan groups have been advocating for more than two years. Although the details won't be easy to agree on, the framework of a grand compromise should by now be obvious to lawmakers.
In fact, it should have been obvious long ago. Seemingly every group not wedded to a particular ideology that has looked at the federal government's long-term deficit and debt problems has come to the same set of conclusions. First, the government's current trajectory is unsustainable. Second, the most significant threat over the long term is rising healthcare costs in Medicare and Medicaid. And third, Washington's budget gap is too wide to be closed just by slashing spending. Congress also needs to increase revenue, preferably by curbing the profusion of exemptions, preferences, credits and deductions in the tax code.
Nevertheless, top lawmakers worked in vain for months last year on proposals to bring the deficit and debt under control, unable to agree even on the outlines of a deal. Too many Republicans were anchored to a pledge never to raises taxes a promise based less on economics than on the politics of winning a GOP primary. And now their party's standard-bearer in the presidential race, former Gov. Mitt Romney, says he too would oppose any increase in revenue. His arithmetically challenged formula for deficit reduction involves lowering tax rates without reducing revenue, while increasing the defense budget and slashing domestic programs. Good luck with that.
Not that President Obama and his Democratic allies have been blameless. They've been so determined to end the Bush-era tax cuts for the wealthy, they've paid little attention to the need for a tax overhaul.
Meanwhile, the economy remains stuck in first gear, keeping unemployment high and tax revenue low. Without faster economic growth, Washington will never be able to solve its fiscal problems. Yet instead of encouraging growth, the federal government may slam the brakes on the economy in January, when a series of huge tax hikes and across-the-board spending cuts are scheduled to take effect. This looming "fiscal cliff" is the ugly result of Congress repeatedly putting off tough budget decisions.
The powerful incentives provided by the fiscal cliff should persuade lawmakers to accept the principles laid out most recently by the chief executives in the nonpartisan Campaign to Fix the Debt. That's just the starting point, of course; other obvious points of contention are how deeply to cut spending and what to cut. So too is how to shift from stimulus to deficit reduction without stunting the economy.
Still, simply having a plan that lays out future changes in taxes and spending would help dispel the uncertainty over federal policy that is hampering economic growth. The sooner lawmakers accept the path laid out by groups like Fix the Debt, the better.