Next Round of Deficit-Cutting Will Be a Long Time in Coming

Next Round of Deficit-Cutting Will Be a Long Time in Coming

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When was the last time anyone cared enough about a deficit reduction proposal to put it on the front pages of national newspapers, on evening news shows and in a thousand blogs? Answer: There were no blogs the last time this happened.

President Clinton signed the last deficit reduction deal of any consequence in August 1997, after negotiations with Newt Gingrich, Trent Lott and the GOP Congress. Wikipedia says the word “weblog” was first used four months later, that December. A year after the 1997 agreement, the budget was balanced for the first time since 1969 and stayed that way for four years. During that time, President George W. Bush took office, cut taxes and helped Washington forget the obsession with deficits that had ruled politics for most of the 1980s and 1990s.

Too bad. Now we’re at the dawn of another Age of Austerity, having unlearned the lesson that an unbalanced budget, like fire, does not get any better when it's ignored. If deficit commission co-chairs Erskine Bowles and Alan Simpson achieved nothing else by releasing their ambitious deficit-reduction proposal last week, they’ve helped intensify the new fixation with the deficit that has already been building for months.

This is how it happens. Budget experts begin warning that the situation is dire. They are ignored. Pundits pick up the issue. A million columns and blogs are written. A commission is appointed to tell everybody what they already know how to do. Candidates run on the issue, offering unserious solutions and pledging to fix the problem right away (Ross Perot said in 1992 that he could balance the budget “without breaking a sweat,” and 18 years later, Kentucky GOP Senate candidate Rand Paul said he’d have a plan to balance the budget in as little as a year). A commission releases a real proposal. Both parties recoil in horror. But by now there’s critical mass. It’s too late to turn back. 

The last time this happened it took almost 20 years to play out, from the election of Ronald Reagan in 1980 (promising to balance the budget while cutting taxes and boosting defense spending) to the first actual balanced budget in 1998. In between there were at least six major budget agreements, each of them chipping away at the problem but none fully resolving it.

Of course, the political costs are often hideous, which is why few do this willingly. Three presidents worked on the deficit over two decades and the only one who emerged unscathed was Ronald Reagan, who oversaw one of the largest tax increases in history in 1982 but somehow – pure charm? -- avoided a backlash. The less adroit first President Bush was defeated for a second term in part for reneging on his “no new taxes” pledge and signing a serious budget deal in 1990. President Clinton saw the Democratic majorities in the House and Senate disappear under a Republican wave in 1994 in part because he had pushed Democrats to approve a serious deficit reduction plan in 1993.

All these were vital steps, and together they helped produce a balanced budget in 1998 (along with a huge tailwind from a booming economy). This time, no one’s talking about balancing the budget – Simpson-Bowles wouldn’t do that until 2037. Rather, the goal is cutting the deficit enough to keep the debt from growing out of control, and even that – as the co-chairs' proposal so usefully demonstrated -- will take a shocking amount of spending cuts and revenue increases.

It's tempting to think deficit reduction will be one-and-done: With great difficulty, the president and Congress will work out package that will make this tedious problem go away for another 20 years. Far more likely is that this is the start of another 20-year cycle, at the end of which babies being born this year will be about to finish college, and there will be more new words like "blog" that we aren't even imagining today.

Henry Aaron dismantled the Simpson-Bowles plan in a compelling Capital Exchange post here that’s worth its own commentary and rebuttal, but this will be short. I think he's right that the 70:30 ratio of spending cuts to tax increases is top heavy, and that capping spending and revenues at 21% of GDP risks setting both numbers unrealistically low -- it's certainly worth a hard look.

But his complaint that the plan would begin cutting spending too soon for a weak economy? Yes, fiscal 2012 begins just 11 months from now, but any real plan built on Simpson-Bowles probably wouldn't take effect until calendar 2012 (fiscal 2013) at the earliest, and could be configured in a way to deal gently (a trigger? a slower ramp-up of cuts?) with the economy if it were still weak. The point is to begin.

There's much more -- it's a very thorough post -- but one more point. The proposal calls for whacking the federal work force -- freeze salaries for three years, cut jobs by 10% and jettison 250,000 contract employees. Henry says the plan "calls for an increase in productivity of federal workers" to offset these cuts, but "it doesn't say how." Maybe I'm missing the point, but this doesn't seem hard -- federal productivity would rise the same way it's risen at private companies that have had layoffs and salary freezes and extra work over the last few years (which describes the newspaper where I work). Everyone who still has a job works harder and does more. It's not voluntary. It's not fun. It works.

George Hager is a member of the USA Today editorial board.

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