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Cleaning Up a Gusher of Debt

Now the hard part.

12:00 AM, Jun 24, 2010 • By GARY ANDRES
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When tiny globs of gooey brown oil began washing up on Gulf shores, it foreshadowed a more ominous environmental calamity lurking just over the horizon.  These first signs were troubling enough. But they also revealed a more daunting threat riding incoming tides that might prove impossible to fix.

Cleaning Up a Gusher of Debt

The Gulf disaster is a metaphor for our federal spending and debt crisis.   Globs of budgetary red ink have been washing up in Washington for some time now.  Cleaning up the immediate problem is hard enough. But the difficulty policymakers face addressing the current fiscal mess only underscores a larger challenge.

The Senate’s efforts over the past month, trying to enact a state aid/unemployment/tax extender bill are illustrative. The Democrats’ original plan exemplified politics as usual.  These initiatives all cost the federal government money.  But instead of making the tough choices necessary to pay for these benefits, they proposed just adding more to the deficit.

But with an election looming and nervous voters increasingly cranky about unsustainable debt, the original Senate plan, which increased the federal debt because it offset less than a third of the  $190 billion in spending, ran into a buzz saw of opposition.  Democratic leaders continue to ameliorate concerns by scaling back the package or finding other offsets.

For example, part of the first Senate package – a provision to avoid a large scheduled cut in payments to physicians who provide Medicare, the so-called “doc fix” -- was originally proposed as a multi-year spending initiative.  Then it was scaled back to only six months, promising Congress would face the issue again after the November election.  Next it was stripped out of the unemployment/tax extender bill completely and lawmakers sought to move it separately.

This process of scaling back, modifying, and searching for offsets demonstrates how fulfilling short term fiscal commitments can tie the Senate in knots.

It’s unclear how lawmakers can resolve other, more immediate budget challenges.  Congress now faces the difficult task of cutting doctor reimbursements, allowing popular tax breaks to expire, letting unemployment benefits lapse, and slashing other forms of assistance to cash-strapped states' budgets.

Yet with a 2010 deficit of about $1.5 trillion and debt projected to triple in the next 10 years, the normal approach of just passing more of these costs on to future generations seems increasingly risky as well.

But there’s more.

Congress’s inability to pass a budget is another example of the shape of things to come.  Enacting such a blueprint in the face of massive debt and daunting entitlement commitments requires unpopular choices just months before the midterm election.

As a result, Democrats decided to punt on passing a budget this year, the first time the House failed to adopt its version of a plan since the 1974 Budget Act created the modern congressional budgeting process.

Again, these actions represent just small globs of fiscal challenges washing up on the steps of Congress now.  Bigger fiscal spills are on the way.

How can Social Security remain solvent with an aging population? Can we afford to pay Medicare benefits with health care costs on the rise? And what if over the next ten years the administration’s economic projections prove wrong? Another recession in the next decade certainly seems possible.  That alone would blow an even larger hole in the White House’s deficit forecasts.

This all raises a scary thought.  As a country we promised a lot. And when it comes to enlarging the public trough, Obama and the Democrats are the gift that keeps on giving.

We offered health care and income support to the elderly; we made commitments to help the unemployed; we provide states assistance for the poor on Medicaid; and we bestow a host of tax incentives for research, education and alternative energy, to name a few.

It’s possible to pay for all this in the short run with borrowed money.  But here’s the rub: We can’t borrow indefinitely.

So the challenges we see playing in Congress right now – how to pay doctors in the Medicare program, provide extended benefits to the unemployed, help states with Medicaid, or even pass a budget blueprint for the year – are all precursors of what lies ahead.

Mr. Obama and his Democratic allies in Congress succeeded in putting a lot on the taxpayer’s credit card.  That was the easy part.

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