Deficit and Debt Make Headlines
Public concern over the United States’ ballooning deficit and debt seems to be growing. Both the cover of this week’s Economist and the lead story on The New York Times website tackle U.S. borrowing. As of this afternoon, The Times story was one of the site’s most emailed.
As The Times explains, the timing of increased government borrowing poses additional challenges:
The problem, many analysts say, is that record government deficits have arrived just as the long-feared explosion begins in spending on benefits under Medicare and Social Security. The nation’s oldest baby boomers are approaching 65, setting off what experts have warned for years will be a fiscal nightmare for the government.
The Economist makes the same argument CRFB President Maya MacGuineas made when testifying before Congress a couple weeks ago. Both argue the U.S. should announce a credible plan to reduce the deficit.
Far from requiring immediate spending cuts or tax increases, a credible plan would reassure markets and allow an orderly exit from fiscal stimulus.
To reduce the debt, The Economist outlines a number of spending cuts and tax increases.
Raising the retirement age for Social Security and Medicare would save money while encouraging Americans to work longer, thereby expanding economic potential. Medicaid could be converted to block grants, compelling states to assume more of the burden of cost control. Other spending should also be vigorously squeezed, to stop federal funds being wasted on highways of dubious value or trade-distorting farm subsidies.
Also a sign that deficit reduction is gaining support, reports indicate that the White House plans to focus on the debt in the state of the union address.
And, another most-read story over at The Wall Street Journal is former CBO director and CRFB board member Douglas Holtz-Eakin’s editorial on “The Coming Deficit Disaster.” He argues that now is the time to deal with the deficit.