02/27/2011 06:37 pm ET Updated May 25, 2011

Fiscal Follies: Can We Defuse the Debt Bomb Without Blowing Up the Economy?

We're not the first to use the "the ticking time bomb" metaphor to describe the country's ominously accumulating national debt and crushing obligations on Medicare and Medicaid. With U.S. debt on track to reach $15 trillion by 2012, and likely to be as big as our entire economy in only ten years or so, it's time to get serious about tackling the debt.

So the question now is how to defuse the bomb. In the movies and on TV, you can generally count on a scene where a sweaty explosives expert pores over a jumble of wires and decides which ones to clip -- think Keanu Reeves in Speed or Ziva in NCIS. In real life, the U.S. Navy counsels recruits who want to become "explosive ordinance disposal technicians" that they'll need "steady hands and even steadier nerves." There's no time to spare, but you can't just reach inside and start wildly yanking out wires.

That's pretty much where we are with the federal budget. Congress and the president need to act quickly, but also cautiously as they work to stem the red ink. Here's where getting the balance right is crucial:

We need tough action that doesn't inadvertently trigger a debt crisis. Sometime between April 5 and May 31, the country's debt will hit the current legal limit of $14.3 trillion, and unless Congress "raises the debt ceiling," the government can't borrow any more money.

At first blush, that might seem like a good way to stop the insanity, but it's extremely risky. For anyone worried that the United States might face a debt crisis like the ones that struck Greece, Ireland and Argentina, refusing to raise the debt ceiling might be the quickest way to do it. Just contemplating the possibility that the U.S. government might not be able to pay interest on Treasury bills or redeem the ones coming due, could panic bond investors worldwide. The biggest advantage we have in grappling with our fiscal problems is that people around the world still see the United States government as one of the safest places to park their money. People want Treasury bonds. If they stop wanting them, if they think that the U.S. government might not honor its obligations, then the party's over.

Right now, prominent Republicans are using the looming deadline to push for major spending cuts beforehand, and that's certainly fair enough. But Bruce Bartlett, an advisor to both President Reagan and the first President Bush, warns that politicians are acting "like children playing with matches" when they "even hint at the possibility of a debt default." The influential fund manager of Pimco, Bill Gross, says so too: "The signal it gives to countries that hold Treasurys is that their assets are hostage to a rogue Congress. That's the message it sends. It's unacceptable."

We need tough action that doesn't cause massive layoffs. The U.S. economy is finally pulling out of the worst recession since the Great Depression, but we're not home free yet. Big tax hikes can derail a recovery, which was a major argument for extending the Bush tax cuts for two years. But drastic, abrupt cuts in federal spending can have the same effect. Huge cuts to education, health care and other federal programs that pass money along to the states could spawn extensive layoffs among government workers. Cutting federal spending on contracts and grants that fund companies and nonprofits nationwide could also threaten jobs. With states and cities facing their own fiscal crises, and federal funding drying up, some economists predict that up to 400,000 government workers could lose their heir jobs over the next few years. Arguably, state and local budget cuts are already holding back the economy. We have to get a handle on government spending; there's not much doubt about that. But with unemployment already unacceptably high, we need to think carefully about how fast to move.

We need tough action that doesn't harm the most vulnerable. Despite our budget problems, the United States is still a very wealthy country. This means we have choices about what we want the government to do and what we're willing to pay in taxes. Right now, the focus is on cutting spending. That's where most American say they want to start, and with a $3.7 trillion federal budget, surely there is ample room for slenderizing.

But once we've cut out spending that's excessive or optional, we'll get to spending that protects the country in a dangerous world, safeguards health and safety here at home, and helps people who are poor or whose lives have been devastated by illness or misfortune. To us, that means higher taxes have to be on the table. Every legitimate, bipartisan fiscal plan we've seen includes both spending cuts and tax hikes, and right now top tax rates are at historical lows. Some politicians, of course, would probably rather defuse a bomb.

So this may be the year for our elected officials to summon a little of their inner Keanu. By all means, do the cutting, but please, look and think carefully while you do it.