The dysfunctional debate on debt

February 28, 2014: 3:45 PM ET
washington capitol debt debate
When it comes to long-term U.S. debt, Washington lawmakers and the White House aren't debating how to handle it, but rather who is ignoring the issue more.
NEW YORK (CNNMoney)

Yes, annual deficits are falling dramatically. But the long-term debt isn't.

And both are projected to resume a northward trek in a few years.

But lawmakers are not talking seriously about how to put the federal budget on sounder footing for the long run.

In some ways, that's not surprising. Lawmakers and President Obama have been at war over the budget and debt ceiling since the 2008 financial crisis.

Those fights yielded the Budget Control Act of 2011 and the fiscal cliff deal of 2013, among other measures, which together have reduced projected deficits by a few trillion bucks over the next decade.

That's not nothing. But those measures don't do much to address the long-term debt problem that will come as the bulk of Baby Boomers retire, health care costs per person rise and interest on the growing debt builds.

What lawmakers have done is buy themselves a little time to plan for that future budget crunch.

The Congressional Budget Office projects that federal spending in coming decades will continually outpace revenue, and that the country's accumulated debt will keep growing faster than the economy.

End result: The vast majority of federal dollars will go to paying entitlement benefits and interest on the debt, leaving less money to pay for everything else Americans expect their government to do.

Related: Deficits continue to drop sharply - CBO

What lawmakers have now is a "quiet" period -- an improved economy and stabilized deficits. If they don't take advantage of it to start talking about these issues in earnest, it will be harder in the future to align spending pressures with incoming revenue. The longer lawmakers wait, the more abrupt the changes they may need to make.

"This is the time," said Douglas Holtz-Eakin, former CBO director and now president of the American Action Forum, a center-right think tank. "Fixing it in the middle of [the crunch] is not the time."

Lower deficits are no cause for celebration

So what is Washington doing? Pointing fingers at who is ignoring the issue more and worrying about the next election.

Take the recent news that President Obama won't include a controversial Social Security proposal in his 2015 budget proposal due out on Tuesday.

The proposal, known as chained CPI, was included in his budget last year and would help reduce deficits by changing how federal benefits are adjusted for cost of living.

Those annual COLA increases, including growth in Social Security benefits, would be smaller under chained CPI than they are under more widely used inflation measures. Hence, why it's so controversial.

Related: 2013 deficit drops to $680 billion

The White House said the proposal is still good if Republicans are willing to close some tax loopholes to raise revenue for deficit reduction.

"That offer has been on the table for more than a year, and we've not seen any constructive engagement from the other side," White House spokesman Josh Earnest told reporters.

Republicans characterized the White House decision to drop the proposal from the budget as a clear sign Obama is done dealing with debt reduction.

"With three years left in office, it seems the president is already throwing in the towel," said Brendan Buck, the spokesman for House Speaker John Boehner.

So there we are. "You won't deal," Democrats say. "No, you won't deal," Republicans say.

Regardless of who you think is right, the fact remains no one's dealing.

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