Leon Panetta: Blowing Up the Debt is a Threat to America

Leon Panetta is a co-chair of the nonpartisan Committee for a Responsible Federal Budget. He recently wrote an opinion piece for USA Today. It is reposted here.

As the tax bills under consideration by the Congress make clear, the congressional budget process is badly broken — and there’s no longer any pretense of trying to get deficits and debt under control.  

The original purpose of the Budget and Impoundment Act enacted in 1974 was to enforce fiscal discipline. It called for Congress to report a budget resolution by April 1 of each year that included spending limits, enforcement provisions and a five-year plan to reduce deficits and move toward a balanced budget. 

Unfortunately, the last time that kind of budget was passed was 1995 — over 20 years ago. The recent budget resolution passed by Congress, far from reducing the debt, specifically allowed up to $1.5 trillion in new debt over 10 years.

The budget process has not only collapsed, Congress is totally ignoring any semblance of fiscal discipline. According to the Congressional Budget Office, the annual deficit is expected to grow to $1 trillion by 2022, and the national debt will double in the next decade to close to 100% of gross domestic product. The result will be increased interest rates, a slowdown in economic growth, the loss of critical financial resources and the likelihood of a serious fiscal crisis.  

In our democracy, we govern either by leadership or crisis. The good news is that with strong leadership, the budget process can work. I have seen it work. As chairman of the House Budget Committee and Office of Management and Budget director in the Clinton administration, I saw Republicans and Democrats willing to work together to produce landmark budgets that effectively reduced record deficits, achieved fiscal discipline and produced a balanced budget and a surplus for the nation. What are the lessons from that experience?

Everything must be on the table 

With record deficits, neither party can afford to exclude areas of the budget from consideration. There are no magic solutions or gimmicks. There are only tough decisions on spending and taxes. In the Reagan, Bush 41 and Clinton administrations, the two parties reached budget deals that achieved savings in Medicare, Medicaid, farm price supports and veterans programs; capped discretionary spending on defense and domestic programs; raised taxes, and enforced those provisions.

The Bush administration, after weeks of bipartisan negotiations at Andrews Air Force Base, agreed to a target of $250 billion in spending savings and a target of $250 billion in new taxes over five years. President Clinton followed the same formula in his first budget. Bipartisan budget negotiations in 1997 affirmed many of the same provisions. 

Presidential leadership is critical

After Reagan passed a large tax cut bill in the early 1980s, deficits began to grow dramatically. The president, to his credit, worked with Democrats and Republicans to enact budget savings and new taxes.  President George H.W. Bush, after his famous “Read my lips. No new taxes” pledge, recognized that growing deficits would undermine the economy. He made a difficult choice to support a bipartisan deal to aim for $500 billion in deficit reduction, including a target of $250 billion in higher taxes. 

Clinton faced opposition within his own party to the $250 billion in entitlement savingsincluded in his first budget. The fact is that presidents through their leadership help provide political cover for the difficult decisions that members of Congress have to make. These are tough votes because no member likes to vote to limit benefits or raise taxes.

Budgets must be enforced

The willingness of Congress to enforce pay-as-you-go provisions was critical. No new spending could come to the House or Senate floor unless it was paid for, and the same was true for any cuts in taxes. And the budgets generally established targets for spending over five years, which provided some certainty to planners at Defense and other federal departments as to what future budgets would look like. 

Budgets are about priorities 

Budgets are not just about numbers but about priorities. Effective budgets achieve savings but also identify important areas for investment. In the Clinton budgets, there were dramatic reductions in the deficit but at the same time, there were investments in many of the president’s priorities like education, research, health care and job training. 

The bipartisan Simpson-Bowles commission tried in 2010 to recommend a comprehensive budget that reflected many of these lessons. Unfortunately, President Obama and many in Congress, Democrats and Republicans alike, were unwilling to embrace those recommendations. It will only happen when leaders are willing to take the risks necessary to governing. 

Of course, a political price may be paid for doing the right thing, but it is nowhere near the price that will be paid if our nation fails to learn the lessons of fiscal discipline essential to a strong economy. 

"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.