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United States News Title: Tea Party's Balanced-Budget Dream Will Take Decades Even for Deficit Hawks Nov. 26 (Bloomberg) -- Senate Republicans have endorsed a call for a constitutional amendment requiring the government to balance its budget after Tea Party candidates made erasing the deficit a rallying cry throughout the U.S. election campaign. While the calls may be urgent, even Washington’s leading deficit foes say it will take decades to balance the books. A proposal by the heads of President Barack Obama’s debt commission to cut the budget by $4 trillion wouldn’t wipe out the deficit for more than 25 years. Representative Paul Ryan, who’s in line to become chairman of the House Budget Committee, predicts it will take a half-century. A panel led by former Congressional Budget Office chief Alice Rivlin that offered its own plan last week wouldn’t even project a date. “This budget is screwed up so badly you can’t balance it in the immediate future,” said Ryan, a Wisconsin Republican who sits on the debt commission and has offered his own “roadmap” for getting U.S. finances in order. Senator Dick Durbin of Illinois, the Senate’s No. 2 Democrat, said the problem is “pure demographics. Boomers are showing up old and sick and, as a consequence, costs are dramatic.” Lawmakers are instead aiming to reduce the deficit as a share of gross domestic product, a standard favored by many economists even as it sets up a clash with those demanding an end to the government’s red ink. ‘A Harder Goal’ “You don’t need to literally balance the budget to get the debt under control,” said Donald Marron, a onetime economic adviser to President George W. Bush. “What you need are deficits to be small enough so that economic growth means the debt is going down relative to the size of the economy,” he said. “It’s always nicer to be able to say you’re going to balance the budget, but that’s a harder goal than stabilizing the debt and bringing it down slowly,” said Marron, now director of the Washington-based Tax Policy Center, a joint venture between the Brookings Institution and Urban Institute. Economists such as former White House budget director Peter Orszag say policymakers should aim to reduce the deficit to no more than 3 percent of GDP because at least then borrowing wouldn’t increase faster than the economy’s projected long-term growth rate and the debt would be sustainable. The $1.294 trillion deficit for the fiscal year that ended Sept. 30 was 9 percent of GDP, according to CBO. Here Come Boomers Budget cutters say it’s much more difficult to show a plausible path to balance than it was just a decade ago when stricter fiscal policies, a roaring economy and a drop in defense spending after the end of the Cold War produced a string of budget surpluses. “That was then, this is now,” said Ryan. What’s changed now is that the first Baby Boomers became eligible for Social Security in 2008 and will begin participating in Medicare next year. That makes it difficult to scale back the programs because budget-cutters want to protect current beneficiaries’ benefits while giving those approaching retirement time to prepare for changes. That means cuts are phased in, which means they can’t be counted against deficit reduction anytime soon. Ryan’s roadmap proposes shifting Medicare to a voucher program where participants would receive fixed payments to buy private health insurance instead of enrolling in the traditional program. It would apply only to those turning 65 after Jan. 1, 2021. Phasing in Changes The debt commission would raise the Social Security retirement age to 68, though that wouldn’t be fully phased in until 2050. By 2075, it would increase to 69. “That gives people a good amount of time to get ready for it,” said Erskine Bowles, co-chairman of Obama’s debt commission. Even unelected officials like Rivlin and the co-leader of her panel, former New Mexico Senator Pete Domenici, who are in no danger of losing jobs to voter outrage over cuts, couldn’t draw up a plausible plan to eliminate the deficit anytime soon. “We thought we had gone as far as we could,” said Bill Hoagland, a former adviser to Senate Majority Leader Bill Frist who helped write the proposal by the Washington-based Bipartisan Policy Center. “To go any farther would have meant more taxes or spending cuts that just weren’t feasible.” Still, he said, “It’s hard to explain to a Tea Party person out there why you can’t balance the budget. I have to balance my checkbook -- why can’t you?” 2.2% of GDP All the budget plans aim to reduce the debt as a percentage of GDP. The $4 trillion in cuts the debt commission proposed would shrink the deficit to 2.2 percent of the economy by 2015 and more in subsequent years. That would be a major improvement over what budget forecasters say would otherwise happen. The debt is currently forecast to climb to almost 90 percent of GDP by 2020 from 62 percent now, according to the Congressional Budget Office. By 2025, it would top the all-time high set during World War II when it reached 109 percent, before zooming upward to 185 percent in 2035. The debt commission estimates it would reduce that to 65 percent in 2020 and 34 percent by 2040. By then, in 2037, when Obama would be 76 years old, the panel projects the government would finally run its first balanced budget -- though commission members have done little to trumpet that. “Can you imagine any elected official saying, ‘I’ve got a 25-year plan to balance the budget?” said Stan Collender, a former congressional budget aide who’s now managing director of Qorvis Communications in Washington. “Politically, it’s a nonstarter.”
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#1. To: Brian S (#0)
So far the only plan from the GOP is that of Paul Ryan, which balances the budget by 2080 by raising taxes on 90% of Americans.
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