The federal budget deficit will top $1 trillion for the current fiscal year, which ends Sunday. It's the fourth time in as many years the deficit will have exceeded that extraordinary amount.
That's a growing long-term problem for the government and the economy, which means it's also a hot political issue. Each presidential candidate says he has a plan to cut deficits down to size, which may lead voters to believe that if they just elect the right person, the federal government will soon stop spending more each year than it collects in taxes. But the deficits are so big -- almost $1.2 trillion of the $3.8-trillion federal budget in 2012 -- the changes needed to rein them in are so painful, and the politics of getting it done so difficult, that deficits will likely be a fact of life for decades to come.
Washington must be careful not to allow deficit cutting to undermine economic recovery. But with the national debt now topping $16 trillion, the government must set a course toward living within its means, and both President Barack Obama and Republican challenger Mitt Romney promise they will lead in that direction.
Obama says he'll cut the deficit by $4 trillion in 10 years. He would do it largely through spending cuts based on budget deals reached last year, tax increases only for the wealthy, closing tax loopholes, ending the wars abroad and controlling medical costs, which would result in savings in Medicare and Medicaid. But modest spending cuts and tax hikes only for individuals earning more than $200,000 a year and couples over $250,000 won't be enough to get it done. And measures to slow the overall increase in the cost of medical care in the Affordable Care Act are speculative at best.
Romney says he will erase deficits entirely in eight to 10 years by cutting spending, including fundamental changes in Medicare and Medicaid, and eliminating income tax deductions and loopholes.
But he has been so vague about the spending he would cut, and the tax deductions and loopholes he would eliminate, that it's impossible to judge if his numbers add up, if his cuts are wise, or if it would be possible to garner the political support to make them happen. And he would dig the budget hole even deeper with the additional tax cuts and trillions of dollars of increased military spending he's promised.
Both candidates' plans include some elements that any realistic deficit-reduction plan must contain, such as spending cuts and tax reform. But to put federal budgets on a sustainable course, Republicans will have to accept some revenue increases and Democrats will have to accept significant cost containment in entitlement programs such as Medicare and Medicaid.
Spelling out a plan is the easy part. Finding the political will to take the hard, unpopular steps toward responsible deficit reduction will be much harder.