Little Hope in Dealing With the Long-Term U.S. Deficit

Once again, President Barack Obama and congressional Republicans are headed for yearlong battles over federal spending, starting with the current clash over immigration policy.

Once again, neither will address the real issue — the massive long-term deficit.

Obama would scrap the rigid spending strictures of the last two years and increase funds by like amounts for some domestic and defense programs, hoping his balanced approach will attract Republican support.

His rationale is that the improving economy and past spending cuts make important spending possible without increasing the annual deficit. The numbers add up — on paper — but Republicans have already rejected the tax hikes needed to finance the increases.

Still, whatever happens this year, any respite will be temporary. By 2017, the deficit will start rising again, largely because the impending retirement of the baby boom generation will escalate the costs of the major entitlement programs, Social Security, Medicaid and especially Medicare.

The Congressional Budget office last week estimated that, as a result, the deficit would rise from $474 million next year to $1.1 trillion by 2025, and from 2.5 percent of GDP to 4 percent.

Those programs comprise about two-thirds of the budget. But past futility and failure have reduced the incentive to deal with them.

Just look at past efforts.

Soon after becoming President, Obama pledged: “I refuse to leave our children with a debt that they cannot repay — and that means taking responsibility right now, in this administration, for getting our spending under control.”

But neither of two significant bipartisan initiatives during his presidency came close to success: a far-reaching plan comprising large spending cuts and tax increases, from the co-chairs of a prestigious, bipartisan panel, former Republican Sen. Alan Simpson and former Democratic Chief of Staff Erskine Bowles, and the 2011 talks seeking a so-called “grand bargain” between Obama and House Speaker John Boehner.

Obama created the Simpson-Bowles Commission, but backed away from its proposals as politically unfeasible. So did most lawmakers.

The Obama-Boehner plan came closer to fruition but collapsed because neither side would take the first step.

That was true, though Obama agreed to modest cuts in the Democratic Party’s most coveted legacy, Social Security, in return for GOP acceptance of tax increases for upper-income taxpayers.

He set off a bipartisan political firestorm by proposing to cut benefits for retired Americans by changing how annual cost-of-living increases are calculated. Many Democrats claimed it would devastate senior citizens and noted Social Security costs were a lesser problem than Medicare costs. Republicans maintained their opposition to tax hikes.

But the GOP encountered trouble deciding which way to go on entitlements. Though it has always pushed for entitlement reform in the abstract, its House campaign committee chair, Rep. Greg Walden of Oregon, attacked Obama for “trying to balance the budget on the backs of seniors.” House Republicans omitted it from their budget plan.

Earlier, 2011, Rep. Paul Ryan, (R-Wis.), then chair of the House Budget Committee, proposed replacing the government-run Medicare system with one giving seniors vouchers to buy private insurance. Democrats said it would destroy Medicare.

But when they helped finance the Affordable Care Act by reducing the Medicare Advantage program, a more costly alternative to traditional Medicare, Republicans accused them of threatening Medicare itself.

This year, House Republicans again are promising entitlement reforms in this year’s budget, but don’t hold your breath. Even Obama’s worthwhile proposals reducing Medicare payments for prescription drugs and raising premiums on higher income Medicare beneficiaries won’t necessarily pass.

Rather, the 2015 budget showdowns will range from this month’s doomed GOP efforts to tie funding for the Department of Homeland Security to rejecting Obama’s immigration initiatives to renewing past cliffhangers on raising the debt ceiling and funding the government after Sept. 30.

“Ultimately,” said the nonpartisan Committee for a Responsible Federal Budget, “it will take a significant package of entitlement and tax reforms to truly put the debt on a sustainable path.”

But after past failures, “ultimately” is nowhere in sight.

This article appeared in print on page 11 of the February 6th, 2015 edition of Hamodia.