What’s hard about deficit reduction isn’t the math
I got into a bit of a back-and-forth with Harold Ford on “Morning Joe” today over entitlements. Ford said he “didn’t like my math,” but the question with math, of course, is not whether you like it, but whether it’s right.
So let’s check it out. Start with Social Security: I said that the size of the shortfall over the next 75 year is 0.7 percent of GDP. You could pretty much wipe that out by allowing the payroll tax to apply to wages over $107,000 (Ford seemed to think the payroll tax applies to earnings up to $116,000 now, but he’s wrong about that). CBO estimates “the 75-year actuarial balance [of Social Security] to be 0.6 percent of gross domestic product.” I’ve seen 0.7 percent of GDP elsewhere, but I’ll take that as a slight strike against me.
As for eliminating the payroll tax cap do, “this option would improve the 75-year actuarial balance by 0.6 percentage points of GDP and extend the trust fund exhaustion date to 2083.” Come 2083, you’d have to do something else to shore up Social Security. But I’d be pretty happy to secure Social Security for the next 75 years. Rep. Ted Deutch, incidentally, has legislation to do exactly that.
The other point I made was that, under the terms of the Affordable Care Act, Medicare’s cost growth is held to GDP plus one percentage point. That’s in section 1899A of the law. It’s certainly possible that a future congress will decide to overrule the intention of the 111th Congress and allow Medicare to grow more swiftly than that, but if they don’t, then we should be in pretty good shape going forward.
This goes to a point that I and many others have been making lately: What we need isn’t a grand bargain on deficit reduction, though grand bargains are good for me personally because they’re interesting to write about. What we need is for this Congress and subsequent Congresses to be committed to reducing the deficit. That means no more unpaid-for tax cuts, a steady effort to use the Affordable Care Act’s cost controls aggressively, some sort of deal on Social Security, and attention to other problems and opportunities as they crop up. That also means no more taking taxes off the table, or pretending for budget purposes that we’re going to cut payments to doctors — or care for seniors -- by some gigantic amount no matter the consequences.
No deal is worth anything if it’s not honored by future Congresses. Right now, we have laws on the books that would bring the budget back into primary balance — the graph atop this post is CBO’s projection of what would happen if we simply stick to current law -- but no one expects them to be enforced. That’s where our deficit projections come from: an assumption that congress will deviate from current law in a way that increases the deficit. But they don’t have to do that! They could deviate in ways that don’t increase the deficit, perhaps by paying for extensions of tax cuts and changes to doctor’s payments.
A grand bargain — which will inevitably rely on caps that future congresses will have to figure out how to implement — isn’t worth anything more than those laws, and perhaps it’s worth quite a bit less, unless it’s enforced. So the question can’t just be whether we can make hard decisions this year and write a big bill that allows us to pat ourselves on the back and say we solved the deficit problem. The question has to be what processes and policies are we putting into place that make it easier for future Congresses to stick to the fiscally responsible laws we put on the books. In the end, real deficit reduction is a decades-long commitment, not a vote and a press conference.