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Americans Get Fiscal Solution; Congress Doesn't

December 26, 2012

This op-ed was written by Paul Hansen, western states regional director for The Concord Coalition. It was published Dec. 22 in the Billings Gazette.

When faced with the numbers, most Americans know what needs to be done to stabilize the nation’s debt and they are willing to take on the shared sacrifice necessary. The protracted debate in Washington on whether we need more revenue or less spending is lost on most of us. We know we need both.

With federal revenue now at 15.8 percent of the gross domestic product, against a post-World War II average of 18.5 percent, the math is simple. During that time, we have never been able to run our nation in the black with such a low revenue percentage. With spending at 23.4 percent of GDP, versus a historical average of 20.9 percent, it is equally clear that spending is too high.

There is no doubt that our exceedingly complex tax code is a drag on economic efficiency. It would be wise to implement a simpler code, even without the looming fiscal crisis. The cost estimates on tax compliance alone vary widely, but range up to $400 billion per year. Reducing credits, exemptions, deductions and other spending through the tax code would provide new revenue, increase efficiency and promote economic growth.

Changes to the big federal entitlement programs are also essential. Without significant changes, these programs will put growing pressure on the federal budget and could eventually bankrupt our children.

According to the Urban Institute, on average a single person retiring in 2010 will get three times his or her lifetime payroll deductions in benefits. For two-earner couples, the ratio is 4-1, and for one-earner couples it is 6-1. Absent reform, those numbers will worsen going forward. Again, the math is clear.

Of course, it will help if we can address the fact that health care costs per person in the United States are twice what they are in the rest of the developed world, with our life expectancy worse than 22 other nations.

Some cuts to non-entitlement spending are already occurring under the Budget Control Act of 2011, with future domestic and military spending capped. This is not the part of the budget where the most growth is projected.

A faster-growing economy would certainly help, even if that alone is not sufficient to solve the problem. The most effective stimulus would be putting a fiscal reform plan in place and sticking to it. Yet acting too quickly during a weak economy would be counterproductive.

Solutions to the nation’s fiscal crisis are known. Political will is lacking. With a debt-to-GDP ratio much higher than our current 73 percent, in 1995 Canada instituted significant fiscal reforms. From 1998 to 2009, our northern neighbor ran a surplus every year and lowered its debt from 80 percent of GDP to 45 percent.

The U.S. Conference of Mayors and two associations of state legislators have issued compelling resolutions that urge action by federal officials. Earlier this year, the National Conference of State Legislators asked Congress and the president to approve a comprehensive plan modeled after recommendations from the Domenici-Rivlin and Simpson-Bowles panels.

Most Americans are appalled that our elected leaders continue to put the nation’s economy and future at risk. The path forward is clear. It is time to act.