John Podesta is counselor to President Obama.
After a hard road and steady progress, the economic recovery is picking up steam. The unemployment rate fell to 5.9 percent in September, the lowest level since July 2008. Exports are up. Factories are churning out more goods, posting their strongest quarter in more than three years.
And the biggest driver of our long-term debt — health-care costs that were on a seemingly inexorable rise for decades — has turned into the biggest driver of our shrinking deficits.
I tweeted this good news to my friend Fred Hiatt last week. Unfortunately, he missed the bottom line, devoting his Monday column to a reprise of the deficit anxiety that has shaped the economic debate in Washington since 2010.
In case you don’t follow me on Twitter, here it is: The Affordable Care Act has already helped slow the rate of growth in health-care costs across the board, putting more money in Americans’ pockets and bringing down projected deficits even as millions more people sign up for health insurance and receive access to Medicaid. The improving economic picture, coupled with concerted measures by the Obama administration to reduce spending and increase revenue from the wealthiest Americans, mean the deficit has been more than halved and is expected to come in under 3 percent of gross domestic product this year — down from nearly 10 percent in early 2009.
The problem with Hiatt’s fixation on what’s going to happen to the budget in 2039 isn’t that high debt-to-GDP ratios don’t have consequences — it’s that deficit angst makes it all too easy for policymakers to ignore the fact that we still need to do more to repair the damage from the Great Recession, to grow wages and help middle-class families feel secure, and to invest in the future. This approach isn’t fiscally reckless; indeed, it’s the only serious way to further improve our economy today and strengthen our balance sheet in the future.
We should start by raising the federal minimum wage to $10.10 an hour, as President Obama called for in his State of the Union address. In real terms, the value of the minimum wage has fallen a third from its peak. Raising the minimum wage would immediately benefit 28 million U.S. workers without increasing the deficit by one cent — and, since low-wage workers are more likely to spend what they earn, businesses and local economies would benefit, too.
We should ditch the sequester, a tool that utterly failed at its ostensible purpose — to urge Congress toward bipartisan compromise — and is serving only as a drag on the economy. The across-the-board budget cuts in the sequester are the wrong way to reduce spending, hitting valuable programs as hard as ineffective ones, and make it more difficult to fund strategic, job-creating investments in education, infrastructure, research and development, and clean energy.
We should build things — roads and bridges, transit and utility infrastructure. Building infrastructure creates jobs and makes our economy more competitive. We can address the shortfall in the Highway Trust Fund and increase infrastructure spending by an additional $90 billion over four years by coupling it with common-sense business tax reform that further accelerates growth and is revenue neutral in the long term.
We should reform our broken immigration system, which would boost growth in the near term and bring down deficits in the future. The Congressional Budget Office estimates that enacting the immigration bill passed by the Senate would increase real GDP by 3.3 percent in 2023 — roughly $700 billion in today’s dollars — and reduce the budget deficit by nearly $850 billion over the next 20 years.
None of this is to say that the president has reneged on his duty to ensure the sustainability and long-term solvency of our most important social programs. In his 2015 budget proposal, he included policies that would yield $438 billion in Medicare savings. The CBO estimates that passing comprehensive immigration reform would add about $300 billion to the coffers of the Social Security Trust Fund over the next decade. And by cutting back on the subsidies that high-income households get through the tax code, we can raise more revenue without raising tax rates.
I understand the value of fiscal discipline. I helped to produce three budget surpluses when I was chief of staff to President Bill Clinton. But our fiscal policies fall short when they don’t serve to build a strong economy for the middle class, when they fail to invest in young people and U.S. workers, when they can’t imagine a future for the social safety net beyond shredding it.
The real choice for Washington is a simple one. We can continue allowing our policy debates to be waylaid by single-minded, blinkered discussion of the long-term deficit. Or we can make the right choice and focus on solving the challenges we face today, on building an economy that works for the middle class, on investing in young people and innovative technologies, on accelerating growth — and, in the end, reduce our long-term deficits and debt and avoid the crisis of 2039.