I have been somewhat taken aback by the sudden burst of news reports and commentary in the news media about increasing revenue to reduce the deficit, with very little discussion about commensurate cuts in entitlement programs. I do believe that President Barack Obama and the Democrats are putting the horse before the cart on this one, and if they don't step back and recalibrate, it may blow up in their faces.
There is no question that the liberals are digging in their heels against cuts in entitlements. Senators Tom Harkin (D-IA) and John D. Rockefeller (D-WVA) sent a letter to Obama last week urging him to "reject changes to Medicare, Medicaid and Social Security that would cut benefits, shift costs to states, alter the structure of these critical programs, or force vulnerable populations to bear the burden of deficit reduction."
One is left to wonder how these venerable solons propose to reduce the deficit and begin chipping away at the national debt without changes to entitlement programs. I can only assume they are not concerned about the red ink, and would have us just keep kicking the can down the road until we become Greece. We have a right to expect more thoughtful service from long-term Senators -- and more courage.
Even more troubling was a statement by White House spokesman Jim Carney that Social Security is not on the table. "We should address the drivers of the deficit, and Social Security is not currently a driver of the deficit," he said.
It isn't? Social Security is currently being subsidized out of general revenues by more than $160 billion a year, and that budget item is growing fast. That's more than $1.5 trillion over 10 years. Carney's statement suggests President Obama and his team believe the Social Security Trust Fund is a real thing. Such fantasies can lead to unsound economic policies. Someone from the Council of Economic Advisors should drop by the Oval Office and explain to President Obama and his team that the Trust Fund is comprised entirely of government bonds, and thus is a liability, not an asset. As the Social Security Administration cashes in those bonds, the government must redeem them taking money out of general revenues. As a practical budget entry, it is the same as if the Trust Fund did not exist.
It is good that they are dusting off the Simpson-Bowles paper, which is something I have been urging for a long time, but they need to read it. At most we may get $1.2 trillion in new revenues over the next decade, not nearly enough to quench the deficit. Simpson-Bowles calls for $3 in spending cuts for every $1 in new revenues. That means changes in Social Security, Medicare and Medicaid that will inevitably be painful, and more cuts in Defense that will cause great anxiety at the Pentagon.
If there were an easy way out of this fiscal imbroglio, we would have taken care of it already. The people who insist entitlements are not on the table need to be isolated and ignored. In this crisis, we need serious people ready to make hard decisions to both raise revenues and cut entitlements.
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.