The Real Deficit Argument

Should our politicians dedicate themselves to solving the problems we face now? Or should they spend their time constructing largely theoretical deficit solutions for years far in the future to satisfy certain ideological and aesthetic urges?

This is one of the two central choices the country faces at the beginning of President Obama's second term. The other is related: Will the establishment, including business leaders and middle-of-the-road journalistic opinion, stand by silently as one side in the coming argument risks cratering the economy in an effort to reverse the verdict of the 2012 election? Yes, I am talking about using the debt ceiling as a political tool, something that was never done until the disaster of 2011.

My first questions are, admittedly, loaded. They refer to a difference of opinion we need to face squarely.

It is entirely true that in the wake of two budget agreements, in 2011 and the just-passed deal on the "fiscal cliff," we have not reduced the deficit enough. The issue is: How much is enough?

Contrary to all the scare talk you keep hearing, Robert Greenstein, president of the Center on Budget and Policy Priorities, notes that we could put the deficit on a sustainable path for the next 10 years with one more deficit-reduction package equal to about $1.2 trillion, plus the resulting interest savings.

By sustainable, I mean keeping the debt from growing as a share of gross domestic product and holding it at around 73 percent of GDP for the next decade. This is a more than reasonable number by international standards. To put it in perspective: According to the International Monetary Fund, in 2011 Canada's debt was at 85 percent of GDP, Germany's was at 81.5 percent -- and Greece's was at 163.3 percent.

Holding the debt ratio in the low 70s is well within our sights. It could be achieved through a combination of $600 billion in cuts and $600 billion in additional revenue through tax reform -- or through modest taxes on carbon or on financial transactions. (OK, for now, I am dreaming on the last two, but they are still good ideas.) The cuts could be made without wrecking Medicare, Medicaid, or Social Security, and without eviscerating government's capacity to invest in the future.

We could then shelve our deficit obsession for a while and confront the problems that should be center-stage over the next few years: restoring shared economic growth, spurring the creation of good jobs, dealing with gun violence, reforming immigration laws, improving our education system, and taking steps on climate change.

But there is the other side of this debate, pushed not only by conservatives but also by a deficit-reduction industry that sees the only test of seriousness as a willingness to slash Medicare, Medicaid, and Social Security for those who will retire 10, 20, or 30 years from now. They want to be able to admire nice predictions on a computer screen that show the debt dropping to 60 percent of GDP.

There is no objection in principle to discussing the modest changes that could improve the long-term stability of Social Security. But when it comes to health care cost projections, there is so much we don't know that it is truly foolish to make decisions now for, say, 2040.

Health care cost inflation has been dropping. We can't be sure how sustainable this trend is, but economists who study the matter think the cost curve may be bending downward for the longer run. The Affordable Care Act contains measures that could further restrain health expenditures.

Is it either sensible or humane to decide in 2013 on the basis of such limited knowledge to toss future seniors and low-income Medicaid recipients under the bus? Health care costs are something we must keep working on. We can buy time for this difficult undertaking by getting the deficit down to a sustainable level.

And that brings us to the debt ceiling. The central weakness of a largely helpful fiscal cliff deal is that it did not save us from a debt-ceiling fight. It would be colossally stupid -- there is no other word -- to derail an economic recovery that is slowly but steadily taking hold with another battle over a silly provision in our law. Will all the respectable people who know this sit on the sidelines and let it happen, or will they speak out now?

We are finally on a promising path. Only politics of a very degraded kind can keep us from moving forward.