Goldmark: U.S. must urgently fix budgets

I hope the congressional deficit supercommittee is paying a little attention to Europe. Because there are some simple lessons from Europe's financial struggles we ought to be learning.

Lesson 1: Don't let your government debt get out of control. Greece did. Spain and Portugal did. Italy did. And now, like stretcher cases, they cannot solve their own problems without outside assistance. In the United States, our federal government debt -- about $15 trillion -- is larger in relation to our gross domestic product than at any time since World War II. Add to that picture the roughly $3 trillion in state and local government obligations, and you're talking about a serious amount of debt. It's time to level that off and start slowly working it down.

Lesson 2: Don't let your government's operating deficits spiral out of control. Europe adopted budget deficit limits for the members of the European Union -- but no one ever enforced them. Even Germany, which struts proudly as the epitome of fiscal rectitude today, failed to call the offending nations to account.

The lesson for us? Start adopting balanced budgets -- fast. Will that be hard to do? Yes. But the alternative is to do it later, when it will cost more and inflict more hardship.

Lesson 3: When you move to get yourself straightened out fiscally, do it decisively and comprehensively, all at once. Europe has been stumbling along incrementally for nearly a year, with a nip here and a tuck there. The result? The rolling snowball of doubt and deterioration got ahead of the "correction measures" and "we're working on it" news releases, and Europe lost credibility with the markets.

The lesson for us? Get it done now, and get it all done. That means instituting enough cuts and revenue measures combined to produce a balanced federal budget on an emergency basis -- this year if possible, for fiscal year 2013 absolutely. It also means paying attention to the states: putting in place a federally assisted workout-mechanism whereby those states in the functional equivalent of bankruptcy, such as Illinois and California, can restructure their expenses and get on the track toward solvency rather than wallowing in stopgaps and deciding each week which bills to pay and which to defer.

Lesson 4: Make sure austerity doesn't kill you. Have you seen film of the rioters in the streets of Athens? The equivalent in the United States would make Occupy Wall Street look like a PTA picnic. There must be stringent cuts. But there must also be revenue increases and steps to help the economy grow based on solid, long-term investment. You can't suddenly slash the public sector to bits and expect the rest of the national economy to function smoothly. One part of the answer is a national capital program to rebuild and modernize our infrastructure. These steps go hand in hand; you can't have a large capital program without a balanced budget, and you won't have a balanced budget for long unless the economy continues to perform moderately well.

Lesson 5: No more new government programs that distribute benefits today on promises that they will be paid for by the next generation tomorrow. That includes generous pension programs that set benefit levels that would be nice for retirees to have, but never make clear how much they would cost and who would pay for them.

Our dilemma is new, and ideological claptrap from the past will not work. The right-wing Republicans say they won't raise taxes, but it was their last round of disastrous tax cuts without offsetting expenditure cuts that gave us the spiraling deficits. And the Democrats have been slow to face the music on reforming our massive government health care entitlement programs, whose cost increases far exceed anything we can afford.

The supercommittee has a chance to be heroes or goats. We have an awful lot riding on which role they choose.

Peter Goldmark, a former budget director of New York State and former publisher of the International Herald Tribune, headed the climate program at the Environmental Defense Fund.