Aug. 21, 2014 SIGN IN | REGISTER

It’s Time to Start Talking About the Budget Deficit

Note that the headline says “talking” rather than “doing” something about the federal budget deficit.

This is a critical difference. It’s still not time to take any actions that will reduce this year’s deficit. In the current economic environment, doing that when private-sector economic activity has not fully recovered would be a Herbert Hoover-like move that would be as incorrect a fiscal policy now as it was back then.

That’s not to say that there haven’t been some positive economic signs in recent weeks. Some things, like consumer sentiment and the Dow Jones Industrial Average, have been moving upward. Other statistics, like unemployment and mortgage defaults, continue to lag behind. And, while it looks good, it’s not at all clear whether the recent uptick in the Dow is real or a bear market rally. As a result, the unambiguous evidence that the economic downturn has ended and that policymakers need to begin shifting fiscal policy from deficit increases to deficit reductions doesn’t yet exist.

That doesn’t mean, however, that it isn’t time to make cutting the deficit a major topic of conversation. To the contrary, even if the question of when has not yet been settled, this is almost the precisely correct moment to begin debating the hows and whys.

Part of the reason is simple logistics. If the current positive economic trends continue, 2011 will be the first full fiscal year for which reducing future deficits below current forecasts and projections will be the correct fiscal policy. That may seem like a long time from now, but the Obama administration will send its 2011 budget to Congress in just about seven months and, if the past is any indication, the Office of Management and Budget is already working on it. That makes it important that, at least behind the scenes if not actually out in the open for all to see, reducing the deficit be part of the current discussion.

Part of the reason is also the absolutely unassailable fact that, even when it’s obviously necessary and required, and even when there’s a consensus that it has to be done, reducing the budget deficit isn’t ever easy. This is true regardless of which political party is in power and even if strong leadership is in place that wants to make it happen.

There’s obviously a great deal of relatively recent federal history that proves this point. But if you think hard-to-adopt deficit reductions are a relic of past budget wars and that the world has changed, look at the fiasco (and that’s too kind a word) in California to know that, even when there will be real and immediate negative consequences, the politics of deficit reduction is no easier now than it was before.

There are four other reasons that the talk about reducing the deficit needs to start now.

comments powered by Disqus

SIGN IN




OR

SUBSCRIBE

Want Roll Call on your doorstep?