10/10/2013 05:07 pm ET Updated Dec 10, 2013

Budget Deal

As has happened often in the past, our political leaders have painted themselves into a corner with no clear way out as the federal government enters a second week of shutdown. This situation causes all manner of inconvenience and hardship to good people who deserve better.

Even worse, if this head-butting continues into mid-month, Uncle Sam could actually default on some of his debt obligations and that has true potential for economic calamity here and around the world. There are some diehards on the right who gleefully insist default would be no big deal, but they do not know what they are talking about. It would be a really big deal for all of us, and a bad one.

The Republicans are taking most of the heat for this imbroglio and rightly so, but President Obama is the only individual with sufficient clout to put an end to this embarrassing situation. Presidents must lead in times of national crisis, and I am encouraged that President Obama invited Congressional leaders to the White House today.

The Republicans started out trying to use the budget impasse as a pretext to defund Obamacare, but that was a bad idea from the beginning. The Republicans are now back to their core issue which is runaway federal spending. That is a thorny issue to be sure, but a legitimate one that Democrats and Republicans can work with in quest of a compromise that both sides can live with.

President Obama can step forward and cut the Gordian knot by offering serious budget restraint in return for putting the government back to work and lifting the debt ceiling. By serious budget restraint, I mean the president must crack the whip on his own party to make meaningful changes to entitlement programs -- Social Security, Medicare and Medicaid - that are devouring our economy at a quickening pace. A short-term debt extension, laying the groundwork for a longer term budget deal, is appropriate.

Rep. Paul Ryan, writing in the Wall Street Journal yesterday, endorsed such an approach. Ryan notes that Obama's insistence that he will not negotiate on the debt ceiling because it is "unprecedented" is wrong. Many presidents have negotiated hikes in the debt ceiling -- including Obama in the Budget Control Act two years ago. Ryan said preserving entitlement programs for the next generation is key to an agreement.

He suggests asking the better off to pay higher premiums for Medicare and reforming Medigap plans to encourage efficiency and reduce costs. Ryan noted that President Obama has endorsed these ideas in budget proposals submitted to Congress, and offered other ideas with bipartisan support -- such as combining Medicare Parts A and B to make them less confusing. Yet another great opportunity for a budget deal would involve comprehensive tax reform that would broaden the tax base, eliminate loopholes, lower rates and simplify the code.

There are a number of ways the White House and Congress can work together to address our long-term budget dilemma that would enable both sides to claim victory, and resolve this vexing standoff. But the president must take the lead, and he needs to act quickly.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. October 2013