President Clinton asked us in 1994 to chair the bipartisan Commission on Tax Rights and Reform to study the future of Social Security, Medicare and Medicaid and recommend measures to ensure their long-term sustainability. The reforms to these popular programs were so politically burdensome that it proved impossible to find consensus on solutions during our tenure in the Senate.
But there was almost unanimity within the committee on the extent of the problem. The rights were on an unsustainable trajectory. They consumed an ever increasing share of federal spending. In 1994, the budget deficit was $ 203 billion (2.8% of gross domestic product) and the national debt stood at $ 3.4 trillion (47.8% of GDP).
The crisis we identified 27 years ago seems negligible given the current debt situation. The non-partisan Congressional Budget Office estimated in January 2020 that annual budget deficits would exceed $ 1 trillion and that the debt, which then hovered at $ 17,200 billion, would more than double as a share of the economy. over the next 30 years. These figures do not take into account $ 65 trillion in unfunded liabilities for Social Security and Medicare. The CBO now predicts that under current law the deficit will reach $ 1.9 trillion in 10 years and the debt will drop from 102% to 202% of GDP within 30 years.
The words “current law” are essential because the CBO only predicts what will happen if the government does not change spending and tax policies. But President Biden has already proposed $ 5,000 billion in additional spending over the next 10 years, largely for new or expanded rights labeled “infrastructure” and “investment.”
Beyond the numbers, the biggest difference between yesterday and today is that in 1994 both parties were concerned about deficits and debt. Today neither Democrats nor Republicans seem to care. Under President Trump, the national debt fell from 76% of GDP to 100%. According to Mr Biden’s first budget proposal, debt is expected to reach 117% of GDP by 2031.
As politicians from both parties toss the budget cuts to the winds, the good news is that a high proportion of voters are still concerned about the debt. An Ipsos poll from April 23-26 found that 75% of people believe too much debt can hurt the economy.
Current numbers suggest the federal government is digging America into a hole. According to the CBO’s benchmark projections, which ignore Mr Biden’s proposals, interest charges will exceed Social Security spending by 2045 and consume nearly half of federal revenues in 2051.
Despite the urgency of the problem, nearly all of Washington’s elected officials are an original co-sponsor of the “do nothing” plan. While today’s hyper-partisan political environment makes it unlikely that our financial crisis will be resolved anytime soon, elected officials would do well to take at least a few steps to resolve the issue.
A promising approach, the Trust Act, has been proposed by bipartisan co-sponsors in the House and Senate, including Reps Mike Gallagher and Ed Case and Senses Mitt Romney and Joe Manchin. The bill seeks to create a process to avoid the insolvency of major federal trust funds, including those covering Medicare hospital insurance, Social Security and highways.
The trust law would also establish a “rescue committee” for each fund made up of six members from each party. These committees would have bipartite co-chairs and would be responsible for drafting legislation to save trust funds. At least two committee members from each party should agree to present proposals by majority vote. Once submitted, the proposals would be promptly considered in the House and Senate. This approach would be fair and practical and would focus on the most pressing issues that have identifiable deadlines rather than trying to solve all of the country’s fiscal challenges at once.
It has become too clear that America cannot build a healthy economy on the basis of unsustainable debt. The longer legislators wait to act, the more difficult the solutions will be and the greater the risks for future generations. Trust law offers a good way to start.
Mr. Kerrey, a Democrat from Nebraska, and Mr. Danforth, a Republican from Missouri, are former US senators and co-chairs of the Concord Coalition.
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