Obama’s deficit promise won’t be easy to keep
A likely topic in his address Tuesday, the long-term budget gap is largely caused by popular entitlement programs.
The federal deficit – a subject President Obama will likely talk about in his Feb. 24 address to the nation – is one of the most persistent policy problems in modern American politics.Skip to next paragraph
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Except for a period in the Clinton years, it has bedeviled US presidents for generations. The US system of government simply finds it hard to make the decisions necessary to get revenues and expenditures to match up for the long term.
Part of the problem is structural. The main drivers of the deficit are the big three entitlement programs of Social Security, Medicaid, and Medicare. They are not susceptible to yearly appropriations review, and reducing their cost is both technically and politically difficult.
Part of the problem may also be caused by the nature of democratic politics. The current system produces lots of partisan competition, procrastination, and obstruction – and may not foster the spirit of mutual sacrifice that budget-balancing requires.
“The regular political process has been incapable of dealing with long-term fiscal issues,” concludes a Feb. 19 joint statement from a bipartisan group of Washington budget experts.
A promise to cut
President Obama says he will cut the long-term gap in half by the end of his first term. Much of his projected savings may come from money saved by winding down the war in Iraq, and an increase in taxes on the wealthy. Obama aides have also hinted at Medicare changes.
Of course, right now red ink isn’t the nation’s biggest economic problem. With the recession deepening, Washington continues to increase federal spending at an unprecedented rate in an effort to stabilize the financial sector, rescue key industries, and stimulate US economic activity.
The deficit for fiscal year 2009 could hit $2 trillion, and will almost certainly surpass 8.3 percent of US gross domestic product, the highest such figure since World War II.
Adjusting for likely economic events and policy interactions, the 10-year deficit may be $10.2 trillion, or 5.5 percent of GDP, according to projections by economists William Gale of the Brookings Institution in Washington and Alan Auerbach of the University of California, Berkeley.
Beyond that, the gap continues as far as the eye can see. Mr. Gale and Mr. Auerbach judge that current policy, if it continues, produces a permanent gap between revenue and expenditures of 4 to 9 percent of GDP.