The Quest for Common Sense and Growth
In its lead editorial of March 16, the estimable New York Times derided what it called "the false consensus that the deficit is an immediate problem" as it made a case for ever more federal spending on worthy social programs such as preschool education.
The editorial's vague language left unclear whether the Times editors believe that no consensus exists or rather that the consensus is predicated upon false assumptions. In either case, it is clear the nation's most prestigious news outlet does not believe the deficit should be our government's primary concern.
The Times' position apparently is shared by Senate Democrats who have proffered a budget that essentially ignores the deficit, and President Obama himself who has yet to offer any serious plan for reining the deficit in. For their part, the Republicans are making the deficit their top priority as if there were no other issues worthy of consideration.
The Times is wrong. There is a consensus that the deficit should be, if not our main priority, at least one of our top priorities, and it is based generally on the common sense notion that we cannot continue spending vast amounts of money we do not have indefinitely.
To be sure, we seem to be on unfamiliar ground. Traditional economic theory teaches that runaway spending leads to inflation. But while we have yet to see much evidence of inflation, we are seeing entitlement spending crowding out everything else in the budget. With every passing year, the growing burden of entitlements, driven by our aging population, is reducing the amount of resources we have available for infrastructure, education, defense, medical research, law and order -- the entire gamut of services we normally expect our government to provide.
Also, we are amassing huge amounts of public debt that must be repaid eventually, presumably by our children. It is imperative that we rein in the red ink and that means we must make serious adjustments to the entitlement programs. The refusal of President Obama and Democratic leaders to acknowledge this reality will impede long-term economic growth.
But the Republican insistence that we take a sledgehammer to the federal budget is equally irresponsible. We need to be realistic about what can be done, and how quickly. Our first priority must be growth. Any combination of spending cuts and tax hikes that would make a serious dent in the deficit in the near term would do serious harm to economic growth and probably leave us with an even bigger deficit than before, as has happened in Great Britain.
Both major parties have adopted extremist positions that are unacceptable, unwise and unworkable. The solution is near term stimulus along with adjustments to entitlement programs over the long term that will gradually reduce their share of the nation's resources. We need something in short supply in Washington these days -- common sense growth policies!
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. March 2013