Feeling confused about all of the debate about the federal budget and the deficit? You are not alone. The level of partisan debate and spin has reached a new level, even by our over-hyped standards. The Financial Times story just after the government shutdown was averted put some perspective on this mess:

“After a ramshackle budget and being brought to the brink of shutdown over trifling disagreements, the world had better start paying attention to the U.S. government’s inability to govern.”

They have it just right. At its heart, the government’s inability to deal with the serious deficit issues we face reflects a fundamental inability to govern that must be addressed if the United States is to continue to enjoy economic opportunity and a high standard of living.

The deficit problem is largely driven by demographics, that is the retirement of the Baby Boomer generation, which will peak by about 2020. The retirement of this group will precipitate a vast and unsustainable increase in Medicare costs. This increase, if unchecked, would precipitate the fall of the dollar and usher in a host of potentially catastrophic economic problems.

These are the indisputable facts and, even though the full effects kick in after 2020, we are entering the period of high risk now. Because it will take several years of more enlightened policy to moderate the effects of the Baby Boomers’ retirement, we need a credible plan soon. Otherwise, the bond markets will reach the same judgment as the Financial Times about our inability to govern, ensuring an economic crisis.

Given that the stakes are so high for the country, you would be right in thinking that our elected representatives, regardless of party, should be working to put together a plan acceptable to all of us. This is presumably why President Obama and legislative leaders empowered a panel of distinguished public policy people last year to recommend a solution.

The panel, chaired by Erskine Bowles, former chief of staff to President Bill Clinton, and Alan Simpson, former U.S. senator from Wyoming, came up with a sensible and largely well-received set of recommendations back in December. This plan did not, however, gain sufficient political support from either political party to be enacted in legislation.

Debate on the plan has been rekindled in the past few weeks because of the shutdown controversy and the release of a Republican plan for addressing the deficit proposed by Rep. Paul Ryan, chairman of the House Budget Committee.

Ryan’s plan is a conservative Republican’s thoughtful approach: substantial cuts to many federal programs, particularly Medicare and Medicaid, but not defense, along with broad-based tax cuts. The plan is responsible enough on the surface and draconian enough in detail to have smoked out the president. Obama finally presented the outline of his plan last week. While we don’t have many details, the president seems to be slightly to the left of the Bowles- Simpson approach.

In ordinary times one would immediately see the bipartisan Bowles-Simpson approach being set up as the obvious compromise position to which responsible politicians of both parties could coalesce. These are not ordinary times.

The Republicans give every indication of truly believing their proposal represents as far to the left as they are willing to go. No tax increases will be tolerated is their mantra. Their actual mantra is no “job-killing” tax increases will be tolerated. This is a mantra for failure — one that will take us all down with it.

Here is a bulletin to the American people from the universe’s reason central: Any successful budget deficit reduction package must involve tax and revenue increases and significant cuts to Medicare, Medicaid, and the military.

This is the most responsible way to reduce the deficit to manageable size and encourage economic growth. Most economists who are not ideologues agree on this.

The Bowles-Simpson Commission agreed on this. Several other bipartisan approaches to the deficit problem have reached similar conclusions. The nationwide group of citizens’ panels convened last year by America Speaks came to this same conclusion.

A nationwide consensus has emerged on this issue, yet Congress refuses to get the message. If Congress blows this one, and there is every indication it will, the U.S. economy will be back on the road to crisis.

The only silver lining I can envision in such a scenario is that it might finally force us to address the corrosive partisanship that is so damaging our democracy.

For me, I am considering safe havens. Friends just back from Panama suggest Sally and I check it out.


Ron Bancroft is an independent strategy consultant located in Portland. He can be contacted at: [email protected]


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