Budget sanity

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Wednesday, January 27, 2010

THE OBAMA administration estimates that the selective spending freeze it will propose next week would save $10 billion to $15 billion in fiscal 2011, which begins Oct. 1. By comparison, just the interest on its debt will cost the government $207 billion in the same year and, at current trends, more than $723 billion per year 10 years from now, the Congressional Budget Office reported Tuesday.

This daunting prospect is not a reason to sneer at the proposed freeze. Small gestures are better than no gestures when it comes to fiscal discipline, and the administration approach has some positive aspects. The president is right to exempt foreign aid and defense spending from his freeze, and he's right to cut selectively rather than treat every program equally.

But it would be a mistake to give too much credit for this latest gesture, which exempts most of the budget, including entitlement programs such as Medicare. The savings will be considerably less than the expense of the next "jobs" or "stimulus" bill, which in the Senate is weighing in at $80 billion and in the House at $156 billion. The savings would be at least partly outweighed by the ongoing cost of the "middle-class tax credits" the administration announced Monday. Moreover, the administration hasn't said which programs it intends to cut to save room for growth in its favored areas; Congress may have other ideas.

All this explains why more radical action is needed -- and why the most consequential action Tuesday was in the Senate, which failed to muster the needed 60 votes to create a budget commission with teeth. Sens. Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.) had proposed creating a bipartisan commission that would consider both spending and revenue and produce a package of reforms intended to put the nation on a more sustainable path. Congress would have been able to accept or reject, but not amend, the package; sadly, this may be the only politically viable approach to budget sanity.

Still, it's encouraging that 53 senators supported the Conrad-Gregg proposal. President Obama, who belatedly endorsed it on Saturday, is likely to create a similar commission by executive order. It's not as good, but it has a chance to work on two conditions: if Senate Majority Leader Harry M. Reid and House Speaker Nancy Pelosi guarantee that its product will receive fair consideration in their chambers, and if Republicans and Democrats alike appoint to the panel members who will negotiate in good faith.

There is a danger, though, that such a commission will provide "great political cover," as Mr. Gregg told us Tuesday, for inaction. So even if there is a panel, the administration must present its own plan for deficit reduction. As the CBO said Tuesday, "Beyond the 10-year projection period, growth of spending for Medicare, Medicaid, and Social Security will speed up from its already rapid rate. To keep federal deficits and debt from reaching levels that would substantially harm the economy, lawmakers would have to significantly increase revenues, decrease projected spending or enact some combination of the two."

Lawmakers and presidents don't like to increase revenue or decrease spending. But the alternative is cascading debt, declining standards of living and an end to American leadership in the world.


© 2010 The Washington Post Company

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