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How to End the Budget Deficit
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15844 |
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CURRENT ISSUES
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1 / 1989 |
3,780 Words |
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Thomas E. Mann and Charles L. Schultze
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The new president faces a formidable political challenge. While some economists and financial leaders have for years been warning that large budget deficits would lead to catastrophe, none has occurred, and the public is growing immune to scare talk. Although far from guaranteed, the United States may be able to continue with large budget deficits and national overspending for another presidential term. The costs of failing to deal with the budget deficit are no less real for all of that.
But, they are gradual in nature, involving an almost imperceptible slowing year by year in the growth of American living standards. Like the fat person who needs to go on a diet but who feels that one more high-calorie meal won't hurt, Americans may rightly feel that one more year of high deficits will not itself cause grave damages. But continue the overeating, and the overspending, and long-term damage mounts up.
Unfortunately, the American political system is not well suited to address this challenge. While no democratic government can easily impose immediate sacrifices on its populace for the sake of future gains, the division of authority and responsibility between the president and Congress makes that task especially formidable in this case. In times of crisis, the government can move with breathtaking speed to change national policy; it can be equally responsive in the face of an insistent, unified citizenry demanding action from its elected officials. But political and institutional forces make it almost impossible for government to embrace austerity measures over the opposition of the public and with no promise of immediate gain or avoidance of disaster.
Some argue quite convincingly that the position is simply too intractable for the government to resolve, that the political obstacles to the fiscal policy recommended here make its adoption highly improbable. Consider those obstacles. The overarching reality is the gap between what the public apparently wants from its government and what it seems willing to pay. By most accounts, the public's demand for government services is rising rather than falling as the Reagan era draws to a close. Although they were careful to avoid specific commitments for large increases in outlays, both presidential candidates acknowledged during the 1988 election campaign that government would be asked to do more, not less, in the years ahead.
No Support for Taxes
At the same time, there is no comparable support for an increase in taxes to finance those services. In 1987 the federal tax burden was 19.4 percent of national income, the same level as in 1980 and slightly higher than the norm in the previous two decades. By these standards, Americans have little reason to believe they are undertaxed. Yet the generous commitment of public funds to Social Security and Medicare and to the buildup of national defense, all of which enjoyed broad public support, combined with the rise in interest payments on the exploding national debt, has left us with substantially more government spending than that historical tax burden can support.
That the public strongly opposes closing the gap by raising taxes is no surprise. Public opinion polls have consistently demonstrated that fact. In fact, an asymmetry in public attitudes toward taxes and deficits normally makes it easier to avoid a revenue
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