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.

The Legacy of Senator Tom Coburn

 

Oklahoma’s Senator Tom Coburn has just retired from Congress after serving six years in the House of Representatives and ten years in the Senate.  He will be sorely missed because his achievements were legion.
By ridiculing the “Bridge to Nowhere” in Alaska in 2006, he eventually prevailed upon Congress to totally eliminate earmark spending by 2011.
Beginning in 2010 his staff compiled an annual “Wastebook” each year listing numerous examples of wasteful spending by the federal government.  The “2014 Wastebook” gives 100 such examples totally $25 billion ranging from laughing classes for college students to a State Department program to dispel the perception abroad that Americans are fat and rude!
CaptureBeginning in 2011, Senator Coburn has prevailed upon the Government Accounting Office to issue annual reports entitled “Actions Needed to Reduce Fragmentation, Overlap and Duplication and Achieve Other Financial Benefits.”  Now, after four years, a total of 226 specific actions have been recommended by the GAO.  GAO’s Action Tracker shows that the government has addressed about 19% of the efficiency recommendations made by the GAO.  Be thankful for small progress!
His latest, finest and presumably last major effort along these lines is a 320 page report, the “Tax Decoder” which is intended to “decode the tax code for every taxpayer.  It reveals more than 165 tax expenditures costing over $900 billion this year.”  Although more than $1.7 trillion in tax revenue was collected by the government in 2014, the IRS will be unable to collect an additional $500 billion that is owed.  This would have been enough to cover the $483 billion deficit for fiscal year 2014!
As Senator Coburn points out in the introduction to this document, “ideally Congress would throw out the entire tax code and start over.  But at the very least, Congress should make the tax code simpler, fairer and flatter.”
It is rare that a single member of Congress makes such an extraordinary contribution to our country’s welfare!