USA Today: Shrinking deficit remains too high
Here's some good news coming out of Washington for a change: The federal government's massive budget deficit is shrinking rapidly.
From a peak of $1.4 trillion in 2009, the deficit is forecast to drop to $845 billion this year and to $430 billion in 2015, says the Congressional Budget Office (CBO). During the three months that end June 30, a period when most Americans pay their taxes, the federal government is expected to run a quarterly surplus for the first time in six years.
This is significant progress, brought about by the recovering economy, and by a series of a spending cuts and tax hikes enacted in recent years. But what should we make of this trend?
Should we chill the champagne? Should we take our cues from liberals who say it's time to stop worrying about debt and focus on job creation and investment? Should we conclude that, even as President Obama and Congress careen from crisis to crisis, they are solving America's fiscal problems?
The answer is: none of the above.
For one thing, the deficit, though lower, remains too high. Yes, this year's $845 billion is an improvement after four straight years of trillion dollar deficits. But the government is still borrowing nearly 25 cents of every dollar it spends, something it should do only during a crisis.
More important, Congress and the White House have yet to address the core problem fueling long-term deficits: the automatic and runaway spending on health care and retirement benefits.
The same CBO projection that shows the deficit bottoming out in 2015 has it bouncing back to nearly $1 trillion by the early 2020s. That's because the deficit-reduction measures taken so far will be overwhelmed by the borrowing needed to fund explosive growth in programs such as Medicare and Social Security as Baby Boomers retire.
This should be a clarion call to liberals to get their heads out of the sand and address the programs' inadequacies. It's true that Boomers have put enough money into the Social Security system to finance their retirements, but the money is gone — spent on previous generations' retirement and for other purposes. That might not be fair, but it's true.
Medicare, meanwhile, is grossly underfunded. According to the Urban Institute, a typical couple who turned 65 in 2011 will have paid $119,000 in Medicare taxes and can expect to receive $357,000 in benefits — with both figures adjusted for inflation. That's not sustainable.
The steps needed to finish the deficit job are spelled out in the latest version of Simpson-Bowles and similar budget plans: Smart, flexible cuts in domestic and military programs. Tax simplification that eliminates loopholes, lowers rates and raises revenue. And changes in the big benefit programs that account for three-fifths of federal spending, such as less generous cost-of-living increases and higher retirement ages for able-bodied workers, and particularly Medicare cost controls.
If Congress and the White House could stop fighting long enough to adopt a farsighted deal with those elements, that would be cause for breaking out the bubbly.