You could almost call it a Christmas miracle: After a bitter, partisan campaign that shifted the balance of power in Washington, President Obama managed to get his fellow Democrats to put aside their differences with congressional Republicans and reach an accord to keep taxes down, while providing aid to the unemployed and the economy.
Well, maybe it wasn’t a miracle. We were already aware that the two parties could happily join forces to indulge in spending that they choose not to pay for. But as families know when they use credit cards to fill Christmas stockings, the bill will eventually come due.
Under current economic and political circumstances, the overall deal is a reasonable one. It makes no sense to raise taxes in a weak economy, which is what would have happened Jan. 1 had Congress not renewed the Bush tax cuts. The one-year reduction in payroll taxes will keep a little more money in everyone’s pocket.
Still, let’s not lose sight of the fiscal cost this measure entails: adding $858 billion to a federal debt that has doubled just in the last seven years.
Now, economists generally agree that running deficits is defensible or even advisable in a recession. Politicians rarely forget that. What they have trouble remembering is that these need to be balanced by surpluses when the economy returns to good health.
So it’s important that this package be the last of its kind. The next task for our leaders is a painful but urgent one: going on a permanent fiscal diet. That means implementing a plan along the lines of that recently outlined by the bipartisan deficit commission, which envisioned a higher retirement age, cuts in defense outlays, and steps to boost tax revenues.
The good news is that many members of the commission showed nerve, overcoming their natural instincts in the interest of fiscal responsibility. Sen. Dick Durbin, D-Ill., came out for raising the retirement age to 69, and Sen. Tom Coburn, R.-Okla., went along with tax increases. The bad news is that seven of the panel’s 18 members voted against the final proposal.
It’s a good start, though. There was another glimmer of hope last week when the Senate dropped a $1.3 trillion spending bill, largely because of opposition to $8 billion in earmarks.
But these will be of no consequence unless Congress and the White House muster the courage and discipline to end the fiscal spree they have been on for most of the last decade. The nation’s long-run economic and political health are at stake.
As the deficit commission noted in its final report: “After all the talk about debt and deficits, it is long past time for America’s leaders to put up or shut up. The era of debt denial is over, and there can be no turning back.”
