Congress begs a crisis to fix the debt

@CNNMoney November 21, 2011: 6:25 PM ET

Rudolph G. Penner is an Institute Fellow at the Urban Institute. He was director of the Congressional Budget Office from 1983 to 1987.

The super committee's failure does not prove that our fiscal policymaking machinery is dysfunctional. That was proved long ago. There have been numerous wasted opportunities to fix our long-run budget problems, starting many administrations ago.

By the late 1970s, it became clear that the plunge in birth rates following the baby boom would be long lasting. That made it obvious that the growth of the labor force would slow and, along with soaring health costs, there would be too few future taxpayers to easily finance all the benefits promised baby boomers when they retired.

And every year that politicians delayed fixing the problem made the needed adjustments more painful. Now, they are so painful that all we see is political gridlock.

One silver lining shines dimly in the gloom of the committee's abject failure: Republicans have opened the door a crack to admit the need for revenue increases.

The fact that the vigorously anti-tax Sen. Pat Toomey announced this concession was particularly significant.

Super committee calls it quits

Toomey's turnabout followed the acceptance of tax increases last year by Republican Sens. Mike Crapo and Tom Coburn and former Sen. Judd Gregg when they served on the president's fiscal commission.

There are growing signs that the pledge to never, ever raise taxes, foisted on Republicans by Grover Norquist, is about to be abandoned.

The lack of a proposal from the super committee is supposed to be followed by a mindless across-the-board spending cut, split 50-50 between defense and nondefense, with exceptions for some welfare programs on the nondefense side.

Most likely the across-the-board cuts will never happen, because they are too painful.

But Congress will find it difficult to abandon them without trying once more next year to cut the deficit more sensibly. Having revenue increases on the table creates a small hope that something good will happen.

I do not want to imply that I love tax increases. They should be kept to a minimum.

However, with health and Social Security spending constituting almost half of noninterest spending, and with both program areas growing faster than tax revenues, it is hard to make debt-reducing arithmetic work without either revenue increases or draconian, politically implausible reforms in Social Security and Medicare.

I believe that the president's fiscal commission got the balance about right when it proposed solving 70% of the long-run problem by slowing spending growth and 30% by raising revenues (not counting the resulting savings in interest costs).

Although I have raised the hope that productive negotiations might occur next year, a wise betting man would not risk much on this outcome without demanding huge odds. It is much more likely that we shall have to wait for a sovereign debt crisis similar to Greece's before our politicians act rationally.

Britain lost its preeminent position in world finance primarily because of huge debts accumulated during World War I. The United States may be the first country in history to lose its dominance because of rising health costs. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.80%3.88%
15 yr fixed3.20%3.23%
5/1 ARM3.84%3.88%
30 yr refi3.82%3.93%
15 yr refi3.20%3.23%
Rate data provided
View rates in your area
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
  • -->

    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.