When it comes to the intertwined issues of dealing with the debt and controlling entitlement spending, the presidential silence was even more deafening. There was a glancing reference to “bringing down our deficit in a balanced way.” About controlling Medicare costs or putting Social Security on a sustainable footing — in time to avert punishing cuts — nary a whisper.
The contrast with 2013 was striking. Then, President Obama noted that “the biggest driver of our long-term debt is the rising cost of health care for an aging population” and argued that “those of us who care deeply about programs like Medicare must embrace the need for modest reforms — otherwise, our retirement programs will crowd out the investments we need for our children, and jeopardize the promise of a secure retirement for future generations.”
That Obama has tired of this issue is no surprise. It generates grief from a base he needs to rev up for November. Suggesting even modest reforms, such as changing the cost-of-living calculation for Social Security, produces a revolt from the left. Meanwhile, the president lacks willing partners among Republicans, with their been-there, done-that attitude toward tax revenue.
From the president’s perspective, he has done his painful share. He agreed to spending cuts and secured tax increases
of nearly $4 trillion, assuming the “sequester” cuts (or their equivalent) stick. Meanwhile, the decline in the growth of health-care costs is looking more like a significant trend than an accidental blip.
As administration officials see it, why expend presidential rhetoric on changes that aren’t going to happen, certainly not in an election year, when Obama could push for programs (infrastructure, education, immigration reform) that stand some chance of passage and could help produce the economic growth essential to paring down the debt?
The problem with this argument is that it feeds into the increasingly conventional narrative about the debt and entitlement reform: There’s no need to worry, and anyone who does is a misguided deficit scold. That’s wrong.
Leave aside the number games about “deficits cut by more than half,” as the president back-patted Tuesday night. True, and better than the alternative, but a misleading and irrelevant measure.
First, the vaunted halving stems from the remarkable (and justifiable) ramp-up in deficit spending at the start of the financial crisis. The deficit in 2009 was $1.4 trillion (and 9.8 percent of gross domestic product). The comparable 2013 figures are $680 billion and 4.1 percent, according to the Committee for a Responsible Federal Budget. Vastly improved, but higher in percentage terms than in all but seven years between 1948 and 2008.
Second, and more important, is the stunning rise in the amount of debt as a share of the economy. When George W. Bush took office, debt stood at 33 percent of GDP. Obama inherited a debt of 43 percent of GDP. That figure is now about 74 percent, the highest since 1950. It is projected to drop to 68 percent by 2018 as additional spending cuts are implemented.
But then, according to the Congressional Budget Office
(CBO), the debt begins to slowly rise again, driven by increasing interest costs and growing spending for Social Security and government health-care programs. By 2038, the CBO projects, debt would reach 100 percent of GDP
, more than in any year except 1945 and 1946.
This is scary, or should be. The CBO ticked off the reasons: Large deficits over the long term drag down economic growth, crowding out investment and driving up interest rates. For the federal budget, higher interest costs consume a growing share of spending, preventing revenue from being used in more productive ways. Sky-high debt constrains policymakers’ flexibility to respond to emergencies such as war or recession. It raises the risk of a fiscal crisis in which investors become unwilling to finance U.S. borrowing.
Once this president promised to stop kicking the can down the road. Now he acts as if there is no can.
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