Let’s Get Real on the Deficit

New York Times Pulitzer Prize-winning columnist David Leonhardt today properly calls “bull$hit” on the hot air being blown out of Washington and among political activists about the reasons behind the federal budget deficit and right ways to address it.

Eventually, the country will have to confront the deficit we have, rather than the deficit we imagine. The one we imagine is a deficit caused by waste, fraud, abuse, foreign aid, oil industry subsidies and vague out-of-control spending. The one we have is caused by the world’s highest health costs (by far), the world’s largest military (by far), a Social Security program built when most people died by 70 — and to pay for it all, the lowest tax rates in decades.

To put it in budgetary terms, the deficit we imagine comes largely from discretionary spending. The one we have comes partly from discretionary spending but mostly from everything else: tax rates, Medicare, Medicaid and Social Security.

The doctrinaire, devoid of a solid theoretical or historical foundation, abhorrence of any increase in taxes or reduction of any tax deduction or shelter  by Republicans has to change.  Clinton’s increase in taxes in the ’90s didn’t snuff out the economy.  Bush II’s tax cuts didn’t fuel it.

While I don’t think that Simpson-Bowles is perfect or nearly enough, it’s a start.  Leaders (as opposed to merely elected officials or politicians–there’s a difference) need to step forward and make this happen.

And don’t get me started on how insane it is to not have approved an increase in the federal debt ceiling.  Play with fire and get burned.  Making a mistake on that topic and we will be paying the price for generations.

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