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A fiscal mess our leaders won't face

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By Matt Miller

Wednesday, December 1, 2010; 11:27 AM

Erskine Bowles is thrilled. Honest!

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"I couldn't be happier . . . regardless of how the vote turns out," he said Tuesday, referring to the fiscal commission he chairs with Alan Simpson. "We've won big: The era of deficit denial in Washington is over."

Actually, as Bowles's former boss Bill Clinton might have said, that depends on what the meaning of "denial" is.

If it means that Washington acknowledges that our deficits and unfunded liabilities are huge and unsustainable, Bowles has a point. Unfortunately, it's a tiny point with little consequence. The well-meaning Kerrey-Danforth Commission, which trod similar ground with similar worthies back in 1994, had unanimous consensus on the same problem - and, likewise, zero agreement on what to do about it.

The truth is that there is deep denial on all sides on what it will take to put our fiscal house in order. Some of the denial is political, because it's safer not to avow things voters don't want to hear. Some of the denial stems from ignorance, because officials haven't thought things through. And some is ideological, because certain facts don't fit with preconceived notions about how the world works.

But one thing is undeniable: Some refusals to face reality matter more than others. To help you keep tabs, here's a radically centrist guide to the three most consequential denials on display as the commission winds up its work.

Conservative denial. The rage among conservatives is that federal spending should not exceed 20 percent of gross domestic product, its rough postwar average. (It has hit 25 percent today because of slow growth and extraordinary anti-recession measures). Mike Pence, who chaired the House Republican Conference before stepping down to flirt with a presidential run, called this week for a constitutional amendment capping Uncle Sam at this ratio. Pence doesn't seem to realize that this would make his idol Ronald Reagan an extra-constitutional rogue, since Reagan ran the government at an average of 22 percent of GDP. And Reagan did this when the population was much younger, and we weren't on the verge of doubling the number of people on Social Security and Medicare as the boomers retire.

Do deniers such as Pence not know this? Do they know and not care? Or are they just unwilling to accept that 20 percent can't happen in real life? Whatever the reason, such poppycock is on the rise. Mitt Romney demanded a rollback to 18 percent in The Post recently. Bowles, in the commission's final report, tries to get Democrats to back a 21 percent target. Some version of this fiscal fantasy could become a litmus test for Republican presidential candidates. And why not? Pretending that spending can stay this low in an aging America is the only way to pretend taxes won't have to rise.

Liberal denial. But conservatives are not alone. The big liberal denial - which sends the left huffing and puffing from the Bowles-Simpson proposals - is that Social Security benefits shouldn't be touched as America ages. Explaining why this is wrongheaded is a column in itself, but suffice to say that it's hard to understand why we would not question a system that, as currently designed, will assure that today's 30-year-olds are "entitled" to benefits about 40 percent higher in real terms than today's seniors receive. Why would we say in advance that such scheduled benefit hikes are off limits, when we face other large unfunded liabilities, there are limits to sensible tax increases and when there are unmet non-elderly needs that should also have a claim on federal resources? Where's the trust fund for great teachers for poor children, for example?

Bipartisan denial. Then there's everyone's health-cost denial. No one's sure how to bend the cost curve; everyone's long-term budget plan thus "assumes" we'll shave cost growth by voucherizing federal health benefits at a lower growth rate than today's. This may be inevitable and even sensible, but it means the federal government can "solve" its health cost problem without anything being done to solve America's health cost problem - the buck would merely be passed to companies, states and individuals. Getting serious here means understanding why we spend 17 percent of GDP on health, Europe spends 10 or 11, and mighty Singapore just 4, yet we don't get better outcomes. The short answer is that every dollar of health care "waste" is someone's dollar of income, and no one has a politically viable way to cut that Gordian knot just yet.

These denials aren't Bowles's or Simpson's fault; the co-chairs have done their best, and their final report is filled with sound trade-offs that are overdue. But we won't make real strides until some new force - our Chinese overlords; a third-party movement; a release of truth serum into Washington's water supply - forces our "leaders" to get real.

Matt Miller, a senior fellow at the Center for American Progress and co-host of public radio's "Left, Right & Center," writes a weekly column for The Post. He can be reached at mattino2@gmail.com. Follow him on Twitter at @mattmillernow.


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