Chipping away at our structural debt
Q:The overwhelming consensus among economists is that the economy needs another shot of short-term stimulus spending. But as the president and congressional leaders have discovered in trying to pass a new stimulus bill, voters want to start bringing the deficit down now. Is this one of those leadership moments when it is better to accommodate strong constituent beliefs rather than trying to convince them they are wrong?
Leadership is sometimes about doing what is right even though it may not be popular. However, to be able to do so the reasons for the related action must be publicly explained in an understandable manner. In addition, the leaders involved must have enough credibility so that their explanations will be believable and their actions acceptable.
Unfortunately, not enough has been done by responsible government officials to explain the difference between our short-term deficits, which are driven largely by temporary factors, and our longer-term structural deficits, which are driven largely by demographics and health care costs. These longer-term structural deficits represent the true threat to our country's and families' futures. In addition, elected officials currently lack credibility with the public in dealing with our escalating deficits and debt.
Given the current state of affairs, a prudent course now would be to take certain temporary, properly designed and appropriately conditioned steps to help ensure that we do not experience a "double dip" recession and to help reduce unemployment. These steps would, however, be coupled with concrete actions designed to demonstrate that Washington understands and will begin dealing with our structural deficits.
One possible step in connection with addressing our structural deficit could be to enact statutory budget controls that would take effect at appropriate points in time (e.g., PAYGO rules that take effect immediately, spending caps that take effect once we are sure that the economy has stabilized and once unemployment reaches a stated level). Another could be to guarantee by law that any of the President's Fiscal Responsibility and Reform Commission's recommendations that receive 14 votes out of the 18 members will receive an expedited vote in Congress. Still another could be to enact statutory enforcement provisions that will ensure that the recently passed health care law will result in the deficit reduction that has been advertised.
In the final analysis, concrete actions rather than words or processes will be needed to restore the public's faith in government. The time to start is now!
Posted by: Barry8 | June 25, 2010 3:05 PM
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