When we interviewed Maya MacGuineas, president of the Committee for a Responsible Federal Budget, early in the summer, our conversation covered much more ground than we could include in our profile of her. But the topics we covered and the points she made – whether or not you agree with her – are too important to our current national predicament to ignore, so we decided to excerpt some of her comments here. They have been edited for clarity.
At this point in our history, fiscal responsibility is a barren political landscape where no serious proposals can gain traction. Between the great divide that separates the Left from the Right, and the many fissures on the Left, it would seem an unlikely place to build common ground. Yet, by throwing ideas onto the table and challenging others to serious debate and discussion, MacGuineas makes it possible to begin the process.
As she told us, “Healthy competition is part of the solution.”
After World War II, from 1946 – 1981, the country reduced the national debt from 119% of GDP all the way down to 32%. This was possible because the US economy grew at an average rate just over 3%, and the debt grew at just 1% of GDP annually. Can we expect to grow our way out of our new historically high debt?
Some people have written that we can, saying, “Don’t worry, we’ve been here before after World War Two.” But the situation could not be more different. Frankly, there’s literally no factor that is similar to then.
We had demographics on our side right after World War II. Now we have massive movement into retirement, into programs like Social Security and Medicare that we continue to fail to put on a path toward solvency.
We had huge amounts of economic growth then that nobody is predicting we will have going forward.
And after the war the country turned around and ran close to balanced budgets. We didn’t have a big structural deficit the way we do now.
Right now we’ve been borrowing just because we don’t want to pay for things. We borrowed 4.7 trillion dollars in the three years of the Trump administration, before COVID, for no reason whatsoever other than pure political laziness.
So, if we will be unable to grow our way out of debt, how do we begin to fix things?
You have to do a little bit of everything. Nobody should hide behind the curtain of “we’re not going to touch major spending programs” or “we’re not going to touch taxes.” We have to do both and we have to do significant amounts of both. We might not be able to do it all at once. We may want to take an incremental approach that is phased in gradually as the economy gets stronger.
We have to fix our major entitlement programs that are headed towards insolvency. Social Security, Medicare Part A, and the Highway Trust Fund. All of those trust fund programs need to be fixed.
We should also look at putting back reasonable discretionary spending caps [on Congress]. They’re going to be running out this year. So we had spending levels in the sequester [from 2014 – 2021] that nobody planned to stick to and they never did. That’s ridiculous. You should put in limits that actually are achievable. So we should put in reasonable discretionary spending caps and we should raise revenues – lots of ways to do it.
My favorite two are, first, getting rid of many of the $1.8 trillion dollar tax breaks that exist in the code right now. And that’s an annual number.
And the second is a carbon tax. We’re going to need a new revenue stream. We should have one that is beneficial in other ways. And obviously, you make other concessions to deal with the distribution of impacts and help people who are harmed by the transitions.
But these are big policy changes, we should be talking about all of them. And they’re also things we should be doing more of. I’m a big fan of more public investments, particularly in human capital.
Infrastructure, yes. But I think that there’s a lot of ways to waste money on infrastructure. So very carefully planned out infrastructure spending. Right now, for example, we spend six dollars on seniors for every one we spend on people under 18. That seems upside-down to me for a country that’s trying to become strong in the future.
Much like our borrowing policy, our budget priorities seem very shortsighted. There are a lot of threats and challenges on the horizon. And the more we’ve already pre-committed our budget to other things [like retirement and healthcare benefits and interest on public debt], the less we’re going to be able to deal with those challenges.
You mentioned that Social Security needs to be fixed. How would you do it?
Fixing Social Security basically involves five measures: raising the retirement age, fixing how we evaluate inflation, slowing the growth of benefits, increasing revenues, and having some – I call them sweeteners – within the deal.
So, one sweetener, for example, would be a specific benefit for those who live very long, like over 85, because despite the fact that seniors are by far the wealthiest cohort in the country, those who live past 85 have more struggles with poverty. So you might want to put a benefit there. We should also slow the growth of benefits for the well-off so we can protect people who depend on the program.
We should raise the retirement age because we all know we’re living so much longer than we used to, when the program was last adjusted, and we can’t afford to support that much more time in retirement.
There are many inequities in the system because rich people live longer than poor people. So we should think about how to make the program fairer. With that in mind, we should rethink the way we calculate inflation like we should throughout the economy, and we should raise more revenues and we should put them in the program.
If we raise the retirement age as you suggest, won’t that encourage seniors to continue working? How viable is it to keep seniors in the labor market at a time when automation is cutting jobs, the pandemic has eliminated some jobs, and new immigrants will continue to add to the labor supply?
I actually am stunned at how this country looks at aging policy, immigration policy, and our economic policy in completely compartmentalized ways. It makes no sense to have huge arguments about the need for more labor right now without also understanding that 10 years from now, probably five years from now, it looks incredibly different due to technological innovation and automation. And so I think that affects immigration policy and how we should be thinking about it in ways that aren’t discussed nearly enough.
We should be having an immigration policy that makes sense with a longer view, not just a moment. And I think it’s also consistent with aging productively, which is thinking about how people as they’re getting older can work because we also have a retirement problem where many, many people haven’t saved enough for retirement.
So, I think the first goal is to figure out how to let people, as they’re aging, work more in ways that work for them. And also understand that whatever you do now may shift in 10 years when we have to have a whole new social contract that deals with disruptions to industries and workers and under-saving. We should have policies that encourage people to save more than they already are.
People are acting like this moment in time is how we should be building long-term economic changes. And it’s not. We should know, again, the pace of change – it’s faster than we’ve ever seen before. And the more that we’re pushing people into the workforce in a way that they have to be there, the more trouble we’re going to be in as a lot of those jobs continue to disappear.
Shortly before the pandemic, the Committee launched FixUS to change how Washington politics works, to get Congress back to the business of governing. What makes you think FixUS can work?
There are a lot of members, both Republicans and Democrats, who do want to do the right thing. And most of them are even willing to do it if it would work. They don’t want to commit political suicide and go out there and admit you have to raise taxes and fix entitlements and all of those things if it’s not going to work. But there are enough of them who understand that they can’t borrow their way to prosperity.
Now we’re spending some time demonstrating how the debt actually is a symptom of how we are divided and that in order to fix the debt, they need to put policy over politics.
They need to put the long-run over the short-term. They need to be willing to acknowledge that budget constraints and trade offs exist and they need to be willing to compromise. Those are basically, in my mind, some of the principles of good governance.
At FixUS, we want to try to ratchet down the polarization of the moment to see if that will allow us to fight about policy – immigration policy, climate policy, education policy, the debt. Let’s bring on the actual discussion.
Problem Addressed: National Debt
Written by George Linzer
Published on October 1, 2021
Feature image: Compiled by The American Leader from multiple sources
Like what you’ve read?
We are committed to
intellectual honesty and the common good.
Please support our work with a generous donation.