The Brookings Institution released a paper today (ok it’s now after midnight – I guess it was yesterday) titled The Future is Now: A Balanced Plan to Stabilize Public Debt and Promote Economic Growth, by William Galston and Maya MacGuineas. The authors lay out both a set of principles and a fairly detailed plan for getting the budget deficit and government debt under control. Their plan aims to limit and stabilize government debt at the end of this decade at 60% of GDP, compared with current projections that have the debt at 90% in 2020 and increasing dramatically beyond that.
They argue first of all that controlling the deficit and debt is important in order to ensure the future health of the US economy, more important that many commentators acknowledge. They point to four specific problems that excessive debt can cause –
- it slows economic growth by competing with the private sector’s need for capital
- increasing interest payments compete with other spending priorities
- interest payments on debt held outside the US transfer wealth out of the country.
- excessive debt raises the risk of a future fiscal crisis
In order to address the threat of a spiralling deficit, they outline five principles that they believe should guide future budget reform –
- Promote shared sacrifice
- Encourage growth
- Protect this in need and increase progressivity
- Enhance the transparency of our spending priorities
- Acknowledge demographic and health care realities
Based on these principles, they lay out what seems to be a reasonably credible plan that involves cuts to defense, domestic discretionary, social security, health, tax expenditure (exemptions) and other spending and increases in revenue.
I’m not in a position to gauge the accuracy of the numbers they give, but what I think is striking is the fact that they (i) do actually attach numbers to the potential savings available in different areas of government spending, (ii) provide some degree of analysis to explain the assumptions that underlie those numbers and (iii) show how those savings in aggregate would lead to a budget deficit of less that 1% of GDP and debt stabilized at 60% of GDP by 2020.
This is in marked contrast to the hand-waving generalities contained in the Republicans’ “Pledge to America”, which promises to control spending, but makes no credible attempt to indicate exactly how potential savings might actually lead to a stable future fiscal position.
It’s encouraging to see a contribution to public debate like the one from Galston and MacGuineas. I was particularly interested to see this comment –
“We believe that the American people want their leaders to treat them like adults who are capable of accepting the truth. But this cannot happen until our leaders begin to act like adults who are interested in solving problems rather than scoring political points.”
On reading this, part of me wants to say “yes please!”, because there is surely a need for exactly this kind of leadership in the US. However I do have to take issue a little with the suggestion that “the American people want…”. I see politicians and commentators so often invoking their own particular claims about what “the American people” want or think and most of the time it is just self-serving nonsense.
The reality is that there is enormous diversity of attitude and opinion within the US and if we are to be realists (which is what Galston and MacGuineas are advocating after all), then I think we should acknowledge that this is true in this context as well. I would go further and suggest that many American people (and I certainly don’t mean that Americans are different in this respect from people elsewhere) actually aren’t “adults who are capable of accepting the truth”, and that that is precisely the reason that they have the politicians they do.