What’s the worst-case scenario if the United States doesn’t get its debt under control? We could become Greece. At least it is according to most members of a recent panel discussion at the Brookings Institution (“The Politics of Entitlement Reform and the Budget Deficit” November 17, 2010). The panel members were all in agreement that spending at the levels we have cannot continue, and that it would take a combination of spending cuts and tax increases to ensure that the worst-case scenario doesn’t occur.
“The public, I believe, is in denial,” said Isabel Sawhill, a senior fellow at the Brookings Institution. This denial is going to make it very difficult for politicians to make the kinds of changes this situation requires. But, Sawhill warned, the changes we need to make right now are much less painful than they will be if we wait until it’s too late.
I worry that the conversation about deficit-reduction focuses too much on cutting programs like Medicare and not enough on reducing other parts of the budget that don’t reflect my values. Defense spending, for example. Or corporate tax loopholes.
The chairs of President Obama’s deficit-reduction committee recently released a draft proposal. This plan from Erskine Bowles and Alan Simpson focuses mainly on cutting spending, with only about 1/3 of the savings coming from revenue increases.
Another recently released bipartisan plan (from Alice Rivlin and Pete Domenici) is much more balanced in this regard. I like how it tries to control future healthcare spending, and Rivlin and Domenici recommend some stimulus for the economy (in the form of a payroll tax holiday). However, the Rivlin-Domenici plan is not perfect. It recommends the creation of a “deficit reduction sales tax”. Sales taxes tend to disproportionately affect people living in poverty—who’ve already suffered enough during this recession.
Also, both plans propose changes for Social Security. This is not a conversation that I believe needs to happen right now. Social Security, by law, cannot borrow money to pay beneficiaries. Therefore, it doesn’t contribute to the deficit. As our country fights over how much to cut and how much to raise taxes, a discussion on Social Security reform only serves to distract people from the real discussion: how to prevent the U.S. debt fro