TWC Talk: Maya MacGuineas on Developing a Responsible Federal Budget
Maya MacGuineas, President of the Committee for a Responsible Federal Budget, recently spoke at The Washington Center.
The Politics of Debt and Deficit
Spending more than we have makes sense sometimes, but often times this occurs because people don’t want to pay for programs they desire. Borrowing for non-economic reasons is a bad choice. This hurts the economy long term and is inter-generationally unfair.
The political situation is so toxic that party leaders instruct members of Congress not to talk about this issue. Polls suggest they shouldn’t either. President Obama and John Boehner twice came close to a big budget deal, but these efforts ultimately failed. The Committee works to build social relationships with and between Republicans and Democrats to help facilitate consensus.
What to Do
1. Stop digging
2. Tax reform
3. Healthcare reform
4. Social security reform
5. Reprioritizing the budget
6. Redefining the budget process
America needs to stop borrowing more than it plans to borrow. The debt held by the public is now 76 percent of GDP. This is twice the historical average and twice as high as when the Great Recession began. The only time it has been higher is after World War II.
President Trump inherits the worse ever fiscal situation in terms of debt to the economy. President Obama did what was necessary for economic recovery, which naturally worsens the fiscal situation. He should have done more once the recession ended to address this.
Trump often responded to budgeting questions by claiming he would grow the economy by four to five percent annually. Two percent is expected. Two and a half percent would be great. We haven’t seen four percent since the 1960’s when baby boomers were coming of age. Now the labor force won’t grow because baby boomers are aging and productivity is shrinking.
Spending cuts or tax increases or both are necessary. Political discourse is bifurcated, all one or the other. Social security should be there for people who need it, but benefits should change for people who don’t. Most people get out of the program much more than they put in because live expectancy is much higher today than when the program was created.
There will be incredible disagreements between Paul Ryan and Donald Trump because they have such different priorities. The amount of debt Trump’s campaign promises would incur are incompatible with economic growth. And you can’t borrow your way to prosperity, though you can have a sugar high. You might be able to grow the economy for a year or so, but it won’t last.
Unfortunately politicians are incentivized to make false promises. Tax cuts do not pay for themselves. They can contribute to economic growth, but can’t make up for lost revenue. One dollar in tax cuts only recoups two to fifteen cents.
Citizens need to help politicians to do the right thing because it’s hard. Many people who come to Congress want to do this. Voters need to reward people who do and say the hard things.