Alice Rivlin wants Republicans and Democrats to stop blaming each other for the federal deficit and start fixing it.
With $85 billion in across-the-board cuts slated to ripple through the economy beginning March 1, the need for a solution is especially pressing, she said.
“We’ve spent a lot of time with each party blaming the other for the state of our federal budget,” said Rivlin, former vice chairwoman of the Federal Reserve Board and a member of the Simpson-Bowles commission on fiscal reform. “We’ve got to stop playing the blame game and get on to constructive policy.”
Rivlin spoke to about 120 business and community leaders at a Greater Des Moines Partnership luncheon Tuesday. CEO Jay Byers said the event was designed to offer bipartisan discussion on important issues.
A federal debt that’s hit $16.5 trillion and is growing will stifle U.S. investment in key areas like roads and education, Rivlin said.
Servicing the debt will “squeeze out the things we need to do to grow the economy,” said Rivlin, who appeared with David Vaudt, the state auditor, and Sara Imhoff, Midwest director of the Concord Coalition, a grass-roots group dedicated to fiscal responsibility.
Rivlin and Vaudt said the U.S. recovery is too fragile to take a hit from the Budget Control Act cuts. “It’s a big mistake for a lot of reasons,” Rivlin said. “It was supposed to force them to come to grips over a big problem. It was never supposed to happen.”
National leaders still have an opportunity to “put our debt on a sustainable track,” said Rivlin, who also co-led the Bipartisan Policy Center’s Debt Reduction Task Force. “I don’t actually mean a balanced budget, because doing that quickly would be quite punishing to the economy. But we’ve got to get to a point where our deficit is small enough — 1 or 2 percent of the gross domestic product — where the debt isn’t growing faster than the economy.”
The federal debt now is about 70 percent of the U.S. GDP, said Concord’s Imhoff.
Rivlin said Democrats blame former President George W. Bush for “starting two wars without raising taxes and adding prescription drugs to Medicare.” And Republicans blame President Barack Obama for taking “federal spending to new heights and record debt.”
“There’s truth to all of these allegations, but they’re also irrelevant,” said Rivlin, a senior fellow of economic studies at the Brookings Institution. “The things that we’re blaming are mostly temporary and they’re things that both parties supported.”
“The things blamed for the past increases are basically behind us,” Rivlin said. “What’s not behind us, and what’s driving federal spending as we look ahead, is the fact that we’re getting older.
“We’ve promised to seniors benefits under Medicaid, Medicare and Social Security that are getting more expensive, because there are more seniors.”
Baby boomers are retiring, with about 10,000 senior citizens entering federal programs a day, Imhoff said.
“We knew that and we didn’t take the proper measures in time, but it’s happening,” Rivlin said.
It’s compounded by the fact that the cost of health care is increasing rapidly.
“What’s driving the federal budget as you look ahead — not these blame-game things — but the aging population and the expensive health care system.”
Without a change in policy, federal spending will rise faster than the economy can grow. “If spending is growing faster than the economy is growing ... you’re in trouble,” she said.
Rivlin compared the budget situation to Americans having a credit card with low interest rates and no cap on spending.
Vaudt, the state auditor, said the country will not solve its fiscal problems by cutting spending or raising revenue alone. “We can’t cut or tax ourselves out of the hole. We need a comprehensive plan,” he said, adding that reforming the nation’s tax code will make the system fairer and raise revenue to reduce the debt.