Deficit Concerns

The recent NBC News/Wall Street Journal poll finds that nearly 60% of Americans believe that President Obama and Congress should worry more about keeping the deficit down.

Americans are correct to be concerned about long-term deficits. Unfortunately, in the short run, only deficit spending by the government can buffer the economy, when consumers and corporations are running on empty.

When must policymakers switch from short term stimulus to long term deficit reduction? Too often deficit debates are framed by the Goldilocks Principle — not too large, not too small, but just right.

At The Daily Beast, Matt Miller proposes a more constructive framework with quantitative targets and triggers tied to unemployment rates.

Obama should insist Congress pass a law that says that once unemployment is back down below 5 percent, it would take a supermajority vote of Congress to run deficits larger than 3 percent of GDP.

- SF

Earmark Reform Thoughts

Norm Ornstein has some reform ideas:

Congress should create a series of bipartisan review boards–similar to the current nominating commissions for federal judicial positions–to review and prioritize all earmark appropriations to ensure they reflect genuine priorities and careful pending.

- MN

Enough About Earmarks

An accessible article from CNNMoney about earmarks

Earmarks are a source of abuse. Their importance is overblown. The real problem is that earmarks crowd out serious discussions about the budget.  Long term budget trends, specifically future Medicare, Medicaid and Social Security obligations, require serious debate, difficult choices and cuts.

Left unchanged, federal spending on Medicare and Medicaid alone, which now accounts for roughly 5% of GDP, is projected to grow to more than 6% in 2019 and to 12% by 2050, according to the Congressional Budget Office. And that doesn’t include the growing cost of Social Security and other government spending.

On Wednesday, President Obama announced earmark reforms that promote greater transparency. It’s a good first step.  It will be more effective if reinforced by a threatened or actual presidential veto.

It’s too late to combat the populist mistrust of earmarks.  Better to reduce the practice to only those instances where absolutely necessary. The sooner this happens, the sooner we can move on to something that matters — the long term budget crisis.

- SF

Fiscally Irresponsible Democractic Congressional Leadership

An overwhelming majority of economists supported the public stimulus plan. An even larger majority of economists, budget experts, investors and citizens are concerned about the sustainability of a federal budget deficit that will exceed 12.0% of U.S. GDP.

The Obama Administration separates the short term obligation to stimulate the economy from the longer term imperative to restore fiscal balance to the federal budget. Speaker Pelosi and Senate Majority Reid have been slow to embrace long term fiscal restraint.

President Obama intended to announce a bi-partisan task force to address entitlement reform. Speaker Pelosi and other Democratic leaders oppose benefit reductions. The future of the task force is uncertain.

Congress is working on a $410 Billion Omnibus Bill to fund the federal government to the end of its fiscal year in September 2009. The bill includes $8 Billion of earmarks for 8,500 pet projects. Senator Reid defends the earmarks as a legitimate method of directing funding.

While true that earmarking places greater control on funding disbursement, it has become synonymous with abuse and waste. Why do it? Ordinary citizens don’t care that Republicans used earmarking to deliver pork to their districts for 6 years when in control of the House, Senate and White House. Earmarks are easy targets for populist anger. Eventually, one party must resist its worst instincts and reform itself. Doing so would demonstrate that Congress is serious about spending restraint and deficit reduction.

Congressional Democrats have an opportunity to define entitlement reform. It’s not a question of whether it happens, but a question of when and how. Speaker Pelosi would be wise to lead rather than obstruct the process.

A moral society does not borrow from future generations to pay for current consumption. Americans are desperate for competent, principled leaders willing to make difficult and unpopular decisions. Unless Speaker Pelosi, Majority Leader Reid and other Congressional Democrats embrace deficit reduction, they are headed for a short tenure in the majority.

- SF