At a time of considerable uncertainty and risk, the United States faces two distinct problems that require different remedies. The economy remains shaky in the near-term, and fiscal policy remains unsustainable in the long-term. As Concord Executive Director Bob Bixby explained in a guest column yesterday in The Boston Globe, however, we can treat both problems at once if we set aside rigid ideological straitjackets and are willing to compromise.
Policies such as extended unemployment benefits and further temporary aid to state and local governments may still be appropriate to support the near-term recovery, he says. Washington can hold down the size of deficits in the next few years and build public trust by making every effort to identify savings from unnecessary programs.
Even with a robust recovery, however, the pre-existing mismatch between future benefit promises and taxation levels would remain. So we should develop a credible plan to bring our long-term structural deficits under control and, as soon as economic conditions allow, begin phasing in the necessary spending cuts and tax increases.