Fiscal Responsibility and Taxes
Last year, then-Chairman of the Joint Chiefs of Staff Admiral Mike Mullen called the nation’s debt “our biggest national security threat.” The national debt has surpassed $16 trillion, and under current law, will continue to grow in the coming years. One rating agency has already downgraded our credit rating, and two others have issued warnings that they might do the same. Our social insurance programs, Social Security, Medicare and Medicaid, which protect millions of American senior citizens, are on an unsustainable long-term path. These programs need reform to stay solvent, but I am committed to making sure they remain intact and in place for generations to come.
Meanwhile, our future needs—from rebuilding our transportation infrastructure to reforming an education system that’s leaving far too many children behind—are pressing. Slashing such investment--eating our seed corn--will only set us further back. This presents us with a thorny and urgent problem.
We didn’t get here overnight. In fact, just 11 years ago, our nation was running surpluses. Two unfunded wars, large tax cuts, undisciplined spending growth and the worst financial crisis since the Great Depression have drained federal coffers. But that doesn’t tell the whole story.
We currently spend about six percent of the federal budget paying interest on the national debt. Under current law, this amount will increase substantially. Interest rates are at a modern low, but will not remain so forever. If we do nothing to reduce the deficit, by 2040, we’ll be spending more to finance the spending of the past than to invest in the future.
Crucially, health care costs are growing faster than the rest of the economy. At the same time, our population is aging, so more people are depending on Medicare and Medicaid. As a result, these very important programs are becoming more expensive every day. The single most important thing we can do for our long-term fiscal stability is to wrestle health care costs to the ground. Health care reform took a major step in the right direction, but those reforms will take years to yield the level of deficit-reduction we need. Making our system of health care better and more efficient must be an ongoing project.
We must cut our deficit, but if we want America to continue to lead the world, we need to invest in the future. China is building faster trains and investing in renewable energy. Students in almost every industrialized country test better in math and science than our children. Meanwhile, high speed internet is still a dream for many Americans, our electrical grid is aging and inefficient, and our bridges are crumbling.
Moving forward, we need to develop a comprehensive plan that restores our nation’s fiscal sustainability. Everything must be on the table, and we must be honest about the task at hand. Any successful plan to reduce the deficit will include fair and well-timed spending cuts, tax reform, and long-term improvements to entitlement programs. Despite the politicking that is leading the deficit debate in Washington right now, a number of reasonable solutions have been proposed.
The Simpson-Bowles Commission put forth a comprehensive plan that reforms federal budgeting over time and with fairness. Although I don’t agree with everything in the Commission’s proposal, it was a solid step in the right direction. The plan will generate $4 trillion in savings over the next 10 years. It achieves this with three key changes to the budget: cuts to spending, including reducing both tax subsidies and defense; reforming entitlement programs for future recipients; and simplifying the tax code by eliminating loopholes and lowering overall rates.
Like Simpson-Bowles, any successful deficit-reduction plan will cut spending and invest in the future without damaging either the tentative economic recovery or the interests of the least well-off. There isn’t a magic bullet, and the choices are hard. Our success will depend on our willingness to make those difficult decisions. I am confident we can rise to the challenge. We must.