First in a series
Once upon a time the federal budget was actually in the black. There were surpluses. The hot political conversation was whether it was wise economic policy to pay off the national debt in full.
Impossible though it seems, those halcyon days weren't all that long ago. Between 1998 and 2001 the government spent $559 billion less than it collected in taxes. But Washington didn't handle prosperity well.
By cutting taxes while fighting two wars, enacting the Medicare drug benefit, bailing out Wall Street and spending to stimulate the recession-ravaged economy, the federal government has racked up an astounding $6.4 trillion in debt since 2002, driving the total national debt to $15 trillion. That's equal to the amount the nation produces annually in goods and services, and roughly $49,000 for every man, woman and child in the country.
Faced with the challenge of arresting that dizzying fall, Capitol Hill and the White House have been seized by partisan rigor mortis. The bipartisan "supercommittee" of a dozen representatives and senators was created in desperation to come up with a plan to shave at least $1.2 trillion from deficits -- the shortfall when Washington collects less in taxes than it spends in any single year -- over the next decade.
Deadline in Congress
The supercommittee has a Nov. 23 deadline, and failure to meet it, or the Dec. 23 deadline for the full Congress to enact the committee's plan, would trigger deep, automatic cuts in defense and domestic spending.
The defense department should be put on a diet. But the cuts, due to begin in 2013, would leave essentially untouched big-ticket items such as Medicare, Medicaid and Social Security that, together with the military and debt payments, account for $7 of every $10 the government spends. And this hammer would do nothing to raise additional revenue. As a result the automatic cuts won't do much to improve the federal balance sheet.
The problem is clear: The federal government will collect $2.15 trillion in taxes this fiscal year and spend about $3.77 trillion. As a share of what the U.S. economy produces, that's a six-decade low in tax revenue and a six-decade high in spending.
So the solution is clear, too: The government has to spend less and bring in more. But Republicans have been unwilling to support new taxes, and without more revenue, Democrats won't support cuts to entitlement programs.
Ideas for change
What's a nervous nation to do?
We will suggest some answers over the next week. The topics will include health care, and the Medicare, Medicaid and Social Security programs that together account for 40 percent of federal government spending. Those entitlement programs have to be made affordable and sustainable with a maximum of fiscal rectitude and a minimum of pain.
We'll fantasize what an ideal tax system would look like if we could just tear up the abominable 3.8-million-word tax code we have now and start over.
Recognizing that such drastic reform isn't going to happen, we'll also suggest ways to make the current code simpler and fairer by lowering tax rates, eliminating loopholes -- including some the public has come to know and love -- and raising revenue to reduce deficits in the bargain.
We'll suggest some ideas for the supercommittee, as it struggles to get the deficit-reduction ball rolling.
And, finally, we'll explain in broad strokes what our brand of fiscal discipline would mean for the region.
What we'll offer is a conceptual road map for a return to fiscal sanity. There are endless details that would have to be hashed out. But that's a job for Congress and the administration -- an urgent one.
A need to restore faith
The public badly needs to see some signs of progress to lift its flagging spirit. Recession, unemployment, stagnant wages, underwater mortgages and a yawning income gap are sapping the public's belief in the American dream.
It's why Occupy Wall Street-style protests have spread like kudzu. There's a conviction taking hold that the U.S. economy is stacked in favor of the moneyed elite, and elected officials are either in on the fix or are irrelevant captives of uncompromising ideology and self-serving partisanship.
Congress and the White House must rise to the occasion. Finally working together to solve the federal government's fiscal problems would be a good start toward restoring faith that the nation's economic problems can be surmounted.
Failure means continuing to run the government of the nation with the world's largest economy on borrowed money. Spending to stimulate a moribund economy and create jobs makes sense in the short term. But for the long haul, we have to pay for what we get from government. And because the gulf between what we pay in taxes and what we spend is so wide, it's going to mean paying more and getting less. That won't be easy -- not for elected officials who must risk the wrath of voters, and not for the rest of us who pay taxes and rely on government services.
A big agenda
But Washington has to clean up its books if it's ever going to make the sort of investment the nation desperately needs to repair highways and bridges, modernize ports, better educate our children, kick the oil habit, shift to green energy, and maintain our key edge in innovation.
Leaving that critical work undone will doom us to economic decline.
Also in the Balancing Act series:
MONDAY, Nov. 14
Health care spending is killing us: Our financial problems won't be fixed until costs are controlled.
TUESDAY, Nov. 15
Securing Social Security: Of the long-term problems threatening to explode spending, this is in many ways the easiest to fix.
WEDNESDAY, Nov. 16
Taxing and spending:
Imagining a fair and simple tax system for the nation.
THURSDAY, Nov. 17
Plugging the loopholes: Tax breaks are costing $1.1 trillion a year -- money that could help solve the nation's fiscal problems. But realistic tax reform could fix this.
FRIDAY, Nov. 18
Super solutions: Why the congressional supercommittee needs to cut entitlements and eliminate tax breaks.
SUNDAY, NOV. 20
What it means for you: There are no easy answers, but if all are willing to give up something, a lot can be gained, including a nation returned to solvency.