This is as much an issue of national security as it is domestic economics. The world still depends upon American leadership, which tips the scales in favor of freedom, democracy, market economics, human rights, and the rule of law. This role is especially important when a range of actors – Islamist extremists to authoritarian capitalists – is trying to tip the scales the other way.
Leadership requires the ability to make choices and back them up with resources. But shrinking budgets, big deficits, looming debt, and a weak economy mean Washington has no resources to spare. America’s fiscal situation diminishes options and saps public confidence. This leads us to eschew involvement in serious crises such as Syria, or retreat from military operations even without success.
As long as every new dollar spent is a dollar borrowed, we will not apply resources strategically. To prevent the markets from swinging wildly, the lame duck session of Congress in December needs to extend the deadlines for sequestration (automatic spending cuts set to begin taking effect Jan. 1) and for when the Bush-era tax cuts (and other tax breaks) expire. Such a move would buy the new president and Congress time – say, three months – to submit a serious long-term debt-reduction plan.
The key components of such a plan are already well-known: reforming the big-ticket items of Social Security and Medicare, so they do not present enormous and unlimited liabilities, and capturing greater tax revenue by simplifying and reforming the tax code. Other cuts to domestic spending and defense can help, but the math will never add up without the big-ticket changes.