What Will It Take to ‘Fix the Debt’?

 

I have recently become a volunteer for the national bipartisan organization, Fix the Debt. It is the outreach arm for the Washington think tank, Committee for a Responsible Federal Budget, which is an offshoot of the Simpson-Bowles Commission from several years ago.
As such, I give presentations to local civic organizations about our national debt and what needs to be done to get it under control. Typically the audience will readily appreciate the seriousness of our debt problem.  What they want to talk about are practical ways to address it.  They have their own ideas and want to know what I think as well.  My first message is that we don’t have to pay off the debt or even balance the budget going forward.  Realistically we need to shrink our annual deficits in order to put the debt on a downward course as a percent of our growing economy,  as shown in the chart just below.

Capture It will be a huge challenge to accomplish even this!  Here are my ideas, in very general outline, on how to get this done:

  • Entitlements (Social Security, Medicare and Medicaid) are the biggest single problem because our population is aging so fast. Furthermore, in order to control the growth of Medicare and Medicaid, we have to do a much better job of controlling the overall cost of healthcare in the U.S. For example, even though healthcare costs slowed down to an increase of only 4.1% in 2014, this is still more than twice the rate of inflation!
  • The second thing we need to do is to make our economy grow faster than the roughly 2.3% growth we have achieved since the end of the Great Recession. The main way to get this done is through broad-based (and revenue neutral) tax reform at both the individual and corporate levels, by reducing tax rates, paid for by closing loopholes and limiting deductions.
  • Finally, there is enormous waste and inefficiency in the federal budget, with huge redundancy and overlap of programs between different federal departments. Responsibility for such programs as education, community development, transportation and social welfare, for example, should be returned to the states with block-grant funding to replace rigid federal control.

I have discussed each of these major reform ideas in much detail in previous blog posts and will continue to do so.  As large as our fiscal problems are, I remain optimistic that they can and will be successfully addressed.

4 thoughts on “What Will It Take to ‘Fix the Debt’?

  1. Back in 2012, your platform was essentially this: It is urgent that we use our moral compasses to realize that we must all share in the pain necessary to reduce deficits to zero quickly, and that’s just simple common sense. That is what I took from all these quotes in 2011/2012:

    “To completely eliminate the deficit, which is my goal, means shrinking the federal budget and, therefore, the federal reach, by 1/3 of its present size and scope.”
    Jack Heidel, Dec 28, 2011

    “The biggest danger by far is doing too little about our enormous deficits rather than doing too much too quickly. It may sound good to say we’ll just take our time reducing the deficit so as not to upset all of the government programs, and their constituents, which will be affected by large cutbacks. But then the national debt continues to increase very rapidly and it is already over $15 trillion. We’re mortgaging the future of our country because our national leaders are unwilling to move quickly on an urgent problem. “
    Jack Heidel, Feb 28, 2012

    “I’m willing to eliminate whole departments if there is enough support to do this. I suspect that it would be less controversial to ask all departments to take equal cuts of some significant size. My focus is to rapidly reduce the deficit down to zero.”
    Jack Heidel, Mar 1, 2012

    “In order to eliminate the deficit we will have to cut back the size and scope of government significantly because we won’t be able to afford all of the programs and services which we currently have. … So my approach will achieve the (more) limited government goal without creating a huge storm of ideological opposition.”
    Jack Heidel, Mar 21, 2012

    “As you know, my highest priority is to eliminate deficit spending over a very short time period.”
    Jack Heidel, Mar 22, 2012

    “My tip top priority is to eliminate the deficit primarily by making big cuts in federal spending. Every federal department, including defense, should take at least a 10% budget cut”
    Jack Heidel, Apr 5, 2012

    “My three top legislative issues will be: 1) to eliminate the deficit, 2) to eliminate the deficit and 3) to eliminate the deficit! Have I made my point clear? … I will buck the Republican House leadership if necessary to insist on bringing deficit spending down immediately and to keep up the pressure until the deficit is entirely eliminated.”
    Jack Heidel, Apr 10, 2012

    To eliminate deficit spending we have got to make cutbacks in all areas of the federal government. … The middle class is also going to have to share the pain by giving up some of its own benefits as well. For example the mortgage interest tax deduction should be phased out, along with many other tax deductions”
    Jack Heidel, Apr 18, 2012

    “…we are falling into a deep fiscal hole and it will be very difficult to ever climb out. But before we can even begin to climb out, we need to stop falling deeper into the hole. This is why it is so urgent to stop spending money we don’t have. … It would be easy to give up on addressing a problem of this urgency and magnitude. This is why we need strong leaders with a firm moral compass that can focus on this critical issue and withstand the inevitable withering criticism from the big spenders. A majority of voters know what needs to be done and I believe that they will support candidates and officeholders who can lay out a credible vision to solve this problem over a short period of time.”
    Jack Heidel, Apr 29, 2012

    “This combination of cutting spending and raising tax revenue would rapidly shrink the deficit down to zero in just a few years. To enact a program along these lines should just be simple common sense.”
    Jack Heidel, May 9, 2012

    Now, in 2015, you are saying this: Non-zero deficits are OK, they just need to shrink:

    “My first message is that we don’t have to pay off the debt or even balance the budget going forward. Realistically we need to shrink our annual deficits in order to put the debt on a downward course as a percent of our growing economy.”
    Jack Heidel, Jan 22, 2015

    So aren’t you now agreeing with what I was saying in 2012? Are you now saying that your “simple common sense” agenda in 2012 was actually incorrect?

  2. My basic response is that you’re nitpicking. In 2011-2012 I was saying that we should eliminate the deficit. Now I’m saying that we should drastically shrink the deficit so that the debt will then be on a downward course as a percent of the economy. I still support a balanced budget amendment which would, in fact, eliminate the deficit. But it will be a difficult and lengthy process to get this done. And we certainly shouldn’t delay action while we’re waiting for this to happen.
    The point is that our debt is way too high. CBO projects that it will be stable, as a percent of the economy, for several years, before it starts climbing again. But stability, even if it lasted indefinitely, is not good enough, because it is too risky. It is inevitable that there will be further shocks to the economy in the future and a debt of 74% of the economy is just too precarious.
    What’s going to happen when interest rates resume their normal level of 5%. Already our future interest payments on the debt will be exorbitant and a growing debt means they will just keep getting worse.
    For me this is a clear-cut moral issue. What we are doing to future generations of Americans is obscene!

    • “In 2011-2012 I was saying that we should eliminate the deficit. Now I’m saying that we should drastically shrink the deficit so that the debt will then be on a downward course as a percent of the economy.”

      Yep– that’s what I said you were saying, except you didn’t use the term (or tone) “drastically.”

      Rather than me nit-picking, it seems to me that your positions are contradictory.

      Is it “urgent that we reduce the deficit to zero in just a few years,” or is it the case that “we don’t have to pay off the debt or even balance the budget going forward?”

      • I choose words and expressions for clarity and emphasis. “Balancing the budget” could be interpreted in an accounting sense to mean exact numerical balance. It would be dopey in a huge economy to expect to achieve this degree of precision. To “eliminate the deficit” gives more flexibility because it does not imply exact balance. To drastically shrink the deficit is even more flexible while still implying a serious purpose.
        I take our deficit and debt problem very seriously. It is the fundamental reason for my involvement in national politics.

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