The following questions provide a framework for ensuring that candidates address some of the toughest choices they will face concerning the federal budget if they are elected. Background information is given to provide context and to help with follow-up questions, which should be asked whenever you believe that you have not been given a complete answer.
Do you believe that budget deficits matter?
The accumulation of large deficits, year after year, burdens taxpayers and undermines future living standards. It does so by soaking up national savings, crowding out investment, and raising interest expenses. Today’s budget policy threatens to place ever-tighter constraints on the ability of future citizens to determine their own fiscal priorities. It also increases our reliance on borrowing from other countries; in effect, mortgaging our future national income. The United States would be in a stronger position to weather difficult times, address emerging national needs and invest in future economic growth if it had greater flexibility and strength in its fiscal position.
Do you have a plan to balance the federal budget?
There is no quick fix. However, commitment to a balanced budget is a good first step. Restoring a balanced budget would increase national savings, lower future interest costs, signal to world financial markets that we are serious about getting our fiscal house in order, and reduce our dependence on foreign lenders. Yet, even with a near-term balanced budget plan, current fiscal policy would remain unsustainable over the long term. A serious effort to maintain sound fiscal policies will require policymakers to tackle the underlying structural imbalance between existing entitlement spending and tax laws, including the many tax preferences that function as “tax entitlements.” Eliminating, or even reducing, the deficit requires tough choices, explicit tradeoffs and bi-partisan cooperation. Insisting that we can solve our fiscal problems by just cutting spending or just raising taxes is unrealistic.
What specific spending cuts would you propose to help balance the budget?
Politicians often talk tough on spending without mentioning what programs they would cut. This is a convenient way to avoid making hard choices. Vague calls to crack down on “pork” or “waste, fraud and abuse” are not enough. Similarly, targeting only certain spending categories for scrutiny is problematic. All parts of the budget must be subject to fiscal scrutiny.
What assumptions do you make regarding the future of defense spending?
Defense spending is 20% of the federal budget and has experienced a sharp increase in recent years primarily due to military operations in Iraq and Afghanistan and growing personnel costs. Last fiscal year alone, Congress appropriated $182 billion for war costs bringing the total spending for military action since 2001 to $859 billion. These costs have been entirely deficit-financed, an historic first for war related expenses, and have shifted the financial burden to future generations. While savings in the defense budget can be achieved in a variety of ways (e.g., scaling back or ending operations in Iraq, cancelling outdated or unproven weapon systems, eliminating waste) any proposal to direct these “savings” to other programs, defense or non-defense, simply shifts priorities while relying upon a continued fiscal policy of borrowing — much of it from abroad.
How do you plan to deal with the budgetary consequences of extending some or all of the expiring tax cuts?
Since 2001, Congress has enacted numerous tax cut packages that expire by 2011. Economists generally acknowledge that tax cuts do not fully pay for themselves through greater economic growth. Thus, extending the tax cuts will require substantial spending cuts, an increase in other taxes or a significantly larger national debt. Both candidates propose tax cut extensions. McCain would extend all of them and Obama would extend them for people with incomes below $250,000. Relative to the laws on the books right now, any extension of expiring tax cuts reduces revenues. The pay-as-you-go (paygo) budget rules in Congress require that this be fully offset with spending cuts and/or increases in other taxes. Yet both candidates propose to exempt these tax cut extensions from the paygo rule, thus ignoring the revenue loss and giving current tax policy an inevitability it should not have. In light of the deteriorated fiscal outlook since the tax cuts were first enacted and the fact that we have not taken action to prepare for the costs of the baby boomers’ retirement, it makes sense to ensure any tax cut extension does not do further fiscal damage.
Will you be as committed to slowing the growth of health costs as you are to expanding health care coverage?
Dramatically increasing health care costs have a huge impact on the federal budget. Medicare costs are projected to grow faster than the economy, and faster than can be reasonably supported. Both candidates talk of expanding health care coverage, which is an important goal. However, it would not, by itself, lower health care costs. Yet, as a politically popular reform, it might provide the momentum for other health care reforms that could slow cost growth. This linkage between broader coverage and tough cost control will be crucial for those seeking a fiscally responsible path for the federal budget. Ultimately our nation must decide what level of health care we wish to provide as an entitlement and how much we are willing to pay for it. Medicare is a leader in the health care system, accounting for 20 percent of total spending. If the next President, with the help of Congress, can agree on meaningful Medicare reforms, it may well lead the way for necessary reforms of the broader health care system.
What steps would you take to close Social Security’s long-term funding gap?
Social Security promises far more in future benefits than it can deliver under current law. Candidates must confront some tough issues. Finding a cure for the challenges facing Social Security will require reduced benefits, increased revenues, or both. Candidates who promise to preserve benefits at the levels promised under current law should explain where the money will come from to fund these promises. Likewise, candidates who promise to oppose any tax increases should explain what changes they would make to restrain the growth of Social Security costs to stay within current tax levels.