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Fiscal reality

 

When President Barack Obama decided to create a bipartisan panel to figure out how to fix the nation’s deficit problem, his announcement ran into a wall of skepticism. Less than two weeks before the first public meeting of the Commission on Fiscal Responsibility and Reform, the doubters are in the majority.

Who can blame them? Even if the panel delivers what the president wants-a plan by December to "improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run"-what are the odds that lawmakers will act on it?

Yet even if the commission manages only to nudge the discussion of the nation’s fiscal mess a few steps in the direction of reality, it will have served a useful purpose.

What does reality look like? According to the non-partisan Congressional Budget Office, Mr. Obama’s budget proposal would translate to a $1.5 trillion deficit in fiscal 2010 and add nearly $10 trillion to the national debt over the next 10 years. By 2020, the government’s total debt would equal roughly 90 percent of gross domestic product.

And, as the CBO noted early this year, after 2020 "growth of spending for Medicare, Medicaid, and Social Security will speed up from its already rapid rate."

Middle-class tax cuts-or extensions of Bush-era reductions-are the main deficit culprit in Mr. Obama’s budget plan, totaling some $3 trillion over the 10-year period. Put those together with the fast-growing entitlement spending, and you begin to grasp the dimensions of the problem.

"To keep federal deficits and debt from reaching levels that would substantially harm the economy," the CBO has warned, "lawmakers would have to significantly increase revenues, decrease projected spending, or enact some combination of the two."

There is one more important aspect to this situation: Most Americans today do not support either higher taxes or reined-in entitlement spending. A recent Quinnipiac University poll found that roughly 80 percent oppose raising taxes on the middle class or limiting future increases in Social Security and Medicare benefits.

It should not take a presidential commission for us to realize that solving a problem requires first owning up to it.

5/14/10 (c) 2010 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail
rbj@rbj.net.

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