Good Liberal Argument Concerning the National Debt

When you throw away the name-calling and other infantile behavior that currently plagues our legislatures at the Federal and State levels it becomes possible to listen to well-reasoned arguments from either side of the political spectrum and learn from it.

I was perusing a Progressive website (Centers for American Progress or CAP) and read an article written Michael Ettlinger and Michael Linden.

Michael Ettlinger is the VP for Economic Policy at CAP, principal developer of the ITEP Microsimulation Tax Model. He holds degrees from Cornell and American University.

Micheal Linden is the Assoc. Director for Tax and Budget Policy at the CAP. He has a master's degree in public policy from UC Berkeley. He is also a children's advocate, working at First Focus.

Both of these gentlemen lean heavily to the left. But, can we actually hear words of common ground from them? You bet...

In an article hosted on CAP's website that was posted on September 30, 2009 titled "Deal wit It. A Guide to the Federal Deficit and Debt".

While I disagree with their position that heavy deficit spending is necessary to prevent economic collapse during challenging times, I found several of the following quotes to be self-evident and very common sense.

"The real challenge is what we face after the recession: significant sustained deficits which, while not quite as eye catching, are equally historic, harder to solve, and pose a greater danger."

They also point out that sustained high levels of national debt can deter domestic investment, lower future incomes, raise interest rates and promote inflation, which causes further damage to people who see their wages fail to keep up with increasing inflation.

They provide a dire warning by stating that the CBO1 and the OMB2 both project high deficits through 2019, the latest year for which they offer their estimates.

The offer the following for consideration:
1) Revenue shortfalls are projected in personal income taxes, corporate income taxes and payroll taxes, especially compared with previous periods (they cite 1998, when the budget was actually generating a surplus of .8 of GDP3). This is especially pernicious in light of the fact that in the short term, stimulus spending (TARP4, ARRA5, TARPII, CARS6) is going to produce greater deficits in the short term, adding dramatically to the national debt burden and therefore also the amount of money the federal government pays monthly on that debt plus interest.
2) Government health care spending is expected to dramatically increase as the baby-boomers go from workers paying INTO social security to retirees taking FROM the system. Hence, the extreme urgency of reforming health care. Yes, health care reform is a national security issue. It's the WAY that we reform health care that is the source of so much angst and invective in our current political conversation.
3) Because of our involvement in Afghanistan, the ongoing campaign against jihadist threats and the likelihood that we will be facing a resurgent threat from an increasingly socialistic Russia and an emerging threat from socialist China, our military expenditures are projected to INCREASE.

These postulations are not in dispute by any reasonable person of either party.

They emphasize the difficult decisions that we are going to have to make and offer the following analysis.

"The [deficit] 6.3 percent of GDP swing is driven by both decreases in revenues and increases in spending." This is also common sense and incontestable. They make more assertions. Let's see if you agree with any of them.

1) Across the board spending cuts aren't likely. Some areas of the [federal] budge will be spared, which means other areas will have to face deeper cuts. Examples: We aren't going to default on our debt payments. We are also not going to cut Social Security, simply control the rate of growth. By taking these two items off of the table, the REST of the budget would have to be cut by 27% to achieve balance, or 14% to bring the deficit to below 2% of GDP.
2) Health care reform (assuming that the current version of USNHC were passed) is assumed to result in significant Medicare cost reductions, but most of these reductions will not become apparent for a decade or more. Assuming we can't cut Medicare, then the remainder of the budget must be cut by 35% to balance the budget or 18% to get the deficit below 3% of the GDP.
3) If we also exempt military spending from the cuts, which we would probably be obligated to do considering our current geopolitical obligations and future scenarios, that would mean that the rest of the budget would have to be cut by 51%.

So what gets cut by 51%? Funds to health clinics, federal retiree and veteran benefits, public schools, grants to higher education, the entire transportation infrastructure, regulatory agencies, the US Post office, etc. This is not a realistic solution.

The other side of the coin is to balance the budget by raising revenues (taxes and fees). It's also equally dismal. We would have to increase federal revenues by 22% in order to balance the budget by 2014. That's a 22% increase in everybody's income taxes, gas taxes, payroll taxes and federal charges. And don't forget that the 50 states are also raising or will be raising taxes and fees. To bring the deficit to 2% of GDP would still require a 12% across the board increase in revenues. However, the current administration has promised that they will not increase taxes on individuals who earn less than $250k annually. This means that family's earning more than $250k annually and corporations would have to pay a tax rate of nearly 70% in order to cut the budget deficit to only 2% of GDP by 2014. Note that this does NOT balance the budget.

They then ask some questions that I don't agree with. Example: "Can the U.S. afford to continue to spend so much more of it's national income than the rest of the world on defense?" As of 2003, the U.S. spent 3.7 of national income on military expenditures, which represented 49% of U.S. discretionary spending. While this does not include the last five years, 49% of the discretionary spending budget is nearly the lowest percentage spent in any given fiscal year since before World War II.

For over four decades our government has run budget deficits, with the natural result that our national debt has grown to a dangerous high. The conclusion: In order to slow our deficit spending and return to a balanced budget or even a budget surplus will require significant sacrifice on our part.

Here's the part my conservative friends isn't going to like. Our economy is a national security issue. We must stop spending money that we do not have. Quite the opposite, we must start to repay the money that we have already borrowed. The only way that we are going to be able to do that is to both reduce government spending (including military and health care) while at the same time, all American citizens are going to be called upon to pay more in fees and taxes while at the same time receiving less entitlements. It's going to hurt. Any conservative that tells me that we can solve this solution while not increasing taxes is not looking dispassionately at the facts of our situation. However, any liberal that thinks we can balance the budget and reduce the debt by increased taxation alone are also equally deluded. Programs of all kinds, including social programs (education, housing, health care, regulatory agencies) are going to have to be cut or dramatically reduced.

We've had our party. It's time to pay the bill.


(1) CBO: Congressional Budget Office, a non-partisan Federal organization that provides the Congress with financial impact analysis.
(2) Office of Management and Budget, a Federal organization that monitors existing Federal spending.
(3) GDP: Gross Domestic Product
(4) TARP: Troubled Asset Relief Program
(5) ARRA: American Reinvestment and Recovery Act
(5) CARS: Car Allowance Rebate System