SHE SAID: Cutting spending now to reduce future deficits is like telling an overweight patient having a heart attack to get on the treadmill

And…we’re off to the races, folks.

Our first posts for this new blog will tell you a lot about who we are and where we’re coming from. As an economist, Rob’s got a lot more financial background than I do, and you can see from his first meaty post, he’s going to give our so-far nonexistent readers a stern dose of dour statistics and dire predictions. Which very well may be true, I’ll admit. I’m not qualified to say.

Or perhaps, I’m not educated enough in the vocabulary he uses to refute his argument in kind. But that wouldn’t be much fun for our readers, anyway.

As a journalist, my job is to ask questions. Lots of questions. And to look at information from a variety of angles, many of which are not as tidy as just doing the math. It’s messy, in fact, mightily messy.

My role in our discussions, as I see it, will often be to try to put Rob’s statistics and projections into human form, and to talk about how the economic and political decisions we make—and those we avoid making—play out for regular working stiffs like me, self employed folks,  struggling homeowners, unemployed folks and those trapped in poverty. And, I’ll try to put the discussion of economic “truths” revealed by numbers into the context of our current political standoff. What should be done is rarely what can be done, and that’s just the reality of Washington.

First, though, a couple of general comments about Rob’s post—which contains enough issues to sustain this blog until summer if we unpack the suitcase and examine each item in context.

The deficit: yep, I’d be a fool to say it wasn’t an issue of concern. For readers, who like me, don’t frequent Congressional Budget Office (CBO) website, you can find a little more context the in the most recent report from Jan 2012. (Don’t be frightened, it’s a fairly digestible.)

My issue with the deficit argument is that historically, the federal government has run up large deficits in times of war and economic hardship. We’ve just had a prolonged dose of both. There are several reasons why this time, this deficit, may be different—or not—but let’s examine them, not just say the sky is falling.

I also think there are times when it’s the fed’s job to prime and support the economy—a “feed the cold” strategy. I don’t think our economy is health enough yet to start putting the screws to it. Cut, yes, but not yet.

It’s also one thing to say we should cut or cap discretionary spending, it’s another to say how we should cut or cap discretionary spending. The devil is always in the details. Who will feel the pain—and there will be pain. If we could gain significant savings by cutting “waste, fraud and abuse” the last four presidents would have already done so.

Tax reform: If only. Yes, we need tax reform and we need greater tax fairness. Politically, both are, unfortunately, unlikely at this time.

And on a more general note, I’m hoping that as we hash this out, we can start looking at more out-of-the-box solutions. I’d like to see a broader discussion, one that isn’t dampened by what’s possible now, but emboldened by what may be possible in the future.

Here are a few examples:

• ·         What impact will it have on boosting green energy development if we, as the President called for recently, stop subsidizing the oil industry to the tune of $4 billion per year?
• ·         What would it mean if every home, business, industry and government office in the U.S. could be heated and cooled in a way that’s cheaper, greener, and more sustainable? And wouldn’t achieving that be worth a substantial investment of federal dollars?
• ·         What would it mean for us to stop spending on outdated and outmoded military technology, retool the industries that make it and re-channel those dollar into making make our country the center of high-tech innovation and manufacturing?
• ·         What would it mean for health care spending if put people’s interests ahead of insurance companies’, if we really do commit to paying for preventative care from cradle to grave, and increase transparency for consumers so we can comparison shop for health care by price and quality? Right now, neither is really possible.

There’s plenty more to say, and I’m sure we’ll both have more to write in the weeks and months ahead. I hope you will too.

Write, comment, question, but be civil about it. We look forward to hearing from you.

Let the debate begin!

Trout

He Said: Start now - cut spending and raise taxes

The biggest elephant in the room is clearly the federal budget deficit, and it’s getting bigger. Our nation’s debt trajectory is unsustainable. There are vast differences of opinions on how to deal with this and when. Not only do we need to return to a balanced budget, but we ultimately need to create surpluses in order to begin to pay down the $15.4T+ in outstanding debt. The federal debt currently exceeds 100 percent of annual Gross Domestic Product. The United States is currently at a crossroads, where fundamental but thoughtful changes can be made now, or else far more painful ones can be forced upon us down the road.

The republican candidates are making promises to slash government spending and details on the specifics are starting to surface. While their respective plans are incomplete, they do provide some insight into what each candidate values.

On the other side, the democrats appear to be unable to collectively put together a plan. Obama proposes that federal spending increase from $3.8 trillion today to $5.8 trillion in 2022 – an annual rate of growth of 4.4 percent, which exceeds all GDP growth rate expectations. In real, per-capita terms, the increase is 17 percent.

The Obama administration commissioned THE NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM (Simpson-Bowles), and then disregarded it – although albeit a little early in the process, it was probably due to re-election on the brain, and an unwillingness to affect material changes. The plan had six major components:

1) Discretionary Spending Cuts: Enact tough discretionary spending caps to force budget discipline in Congress. Include enforcement mechanisms to give the limits real teeth. Make significant cuts in both security and non-security spending by cutting low-priority programs and streamlining government operations. Offer over $50 billion in immediate cuts to lead by example, and provide $200 billion in illustrative 2015 savings.

2) Comprehensive Tax Reform: Sharply reduce rates, broaden the base, simplify the tax code, and reduce the deficit by reducing the many “tax expenditures”—another name for spending through the tax code. Reform corporate taxes to make America more competitive, and cap revenue to avoid excessive taxation.

3) Health Care Cost Containment: Replace the phantom savings from scheduled Medicare reimbursement cuts that will never materialize and from a new long-term care program that is unsustainable with real, common-sense reforms to physician payments, cost-sharing, malpractice law, prescription drug costs, government-subsidized medical education, and other sources. Institute additional long-term measures to bring down spending growth.

Mandatory Savings: Cut agriculture subsidies and modernize military and civil service retirement systems, while reforming student loan programs and putting the Pension Benefit Guarantee Corporation on a sustainable path.

5) Social Security Reforms to Ensure Long-Term Solvency and Reduce Poverty: Ensure sustainable solvency for the next 75 years while reducing poverty among seniors. Reform Social Security for its own sake, and not for deficit reduction.

6) Process Changes: Reform the budget process to ensure the debt remains on a stable path, spending stays under control, inflation is measured accurately, and taxpayer dollars go where they belong.

It is apparent to many of us looking in from the outside, that revenues have to go up (higher taxes, less tax credits/deductions), and spending has to be reduced. The Simpson-Bowles report seems to be an excellent and thoughtful framework upon which begin meaningful discussion, and agreement/compromise could begin between the two political parties. But unfortunately the reality is that everyone is for “shared sacrifice” until it affects their state, district, company, and or household. It is important to note that even the Simpson-Bowles report/projections did not return the federal government to a balanced budget until 2035.

The sooner decisions and changes are made, the better, because they can be phased in more gradually, allowing more time for the economy to recover and the public to adjust, all while providing more stability in the economy. The presidential election season offers the candidates a unique opportunity for leadership in advocating solutions to put our nation on a path to fiscal sustainability.