(Washington Post) – One thing you won’t hear when President Obama delivers his State of the Union address Tuesday: An ambitious new plan to rein in the debt.
In recent days, the White House has pressed the message that, if policymakers can agree on a strategy for replacing across-the-board spending cuts set to hit next month, the president will pretty much have achieved his debt-reduction goals.
“Over the last few years, Democrats and Republicans have come together and cut our deficit [over the next decade] by more than $2.5 trillion through a balanced mix of spending cuts and higher tax rates for the wealthiest Americans. That’s more than halfway towards the $4 trillion in deficit reduction that economists and elected officials from both parties say we need to stabilize our debt,” Obama said during his weekend radio address.
By the administration’s math, Washington needs to enact only another $1.5 trillion in 10-year savings to hit the $4 trillion target, White House economic adviser Jason Furman told reporters last week. At $1.2 trillion, the automatic cuts, known as the sequester, quite nearly fit the bill.
The problem with this scenario? It would indeed stabilize the national debt, compared with the broader economy, for the next 10 years. But the debt would fluctuate between 73 percent and 77 percent of gross domestic product, according to new projections by the nonpartisan Congressional Budget Office — the highest level in U.S. history except for the period after World War II.
It’s also much higher than the 62 percent target policymakers were aiming for just 3 years ago when Obama appointed the Bowles-Simpson debt-reduction commission. And because policymakers have avoided reforms to the big health and retirement programs, the debt would start rising again after 2023, as the baby boom generation retires.
“While the deficit reduction enacted to date represents notable progress, our debt problems remain far from solved,” analysts for the bipartisan Committee for a Responsible Federal Budget wrote last month. “By our estimates, lawmakers have achieved only slightly more than half of the minimum necessary deficit reduction to achieve sustainability over the next decade (and less than 40 percent of the savings in the Simpson-Bowles plan), only one third of the deficit reduction needed through 2040, and only one sixth of the deficit reduction needed through 2080.”
Despite the enacted savings, “debt remains on an upward path — on course to exceed 100 percent in the early 2030s, 200 percent in the 2050s, and 300 percent in the 2070s,” the report says. “These levels are clearly unsustainable.”
The committee concludes that policymakers need to find another $2.2 trillion in savings. Meanwhile, congressional Republicans have set their sites on roughly $4 trillion in savings on top of the sequester, the figure the CBO says would be required to wipe out deficits entirely by 2023.
That’s an astronomical figure, and House Republicans have pledged to do it without raising taxes, cutting military spending or reducing current benefits for the elderly. That doesn’t leave much to cut, but it’s the only path to bring the debt down, both as a percentage of the economy and in actual dollars, by 2023, according to CBO estimates.
Administration officials, meanwhile, say the president is willing to look for additional savings. But any new debt-reduction package must include new revenue, they say, for example by capping itemized deductions for wealthy households.
The package doesn’t have to be 50/50, Furman said, suggesting that a ratio of $1 trillion in spending cuts to around $500 billion in tax hikes might be acceptable to Democrats.
Not so much for Republicans, though — leaving the parties facing the same old stalemate for the third year in a row.