One of the few justifications I’ve heard for focusing so much time on reducing the deficit at this moment, even though people are practically paying the federal government for the privilege of being able to loan it money, is that somehow we can “fix the problem forever.” The logic goes that if only we could get a grand bargain we would take all these issue off the table for over a generation. It could try to explain why, on a theoretical level, this logic is flawed; but fortunately I don’t need to. In just the past decade there have been two dramatic real world examples of why this idea is so silly. The problem is that a previously Congress can’t bind the decision of a future Congress, especially on the issue of deficit reduction.
When Bill Clinton was in office he effectively “fixed the deficit forever.” Almost immediately the Republican Party started saying deficits don’t matter. We even had Federal Reserve Chairman Alan Greenspan warning about the dangers of a possible government surplus. As a result just a few years after the problem was fixed, the Republicans passed huge tax cuts and new spending programs brought it back.
The other powerful example is right now. Thanks to laws already enacted by previous Congresses, including the AMT, Bush tax cut expiration, and the Medicare Sustainable Growth Rate, the deficit is is currently “solved forever” under existing law. According to the Congressional Budget Office, if Congress simply allowed the laws on the books to go into effect, the deficit will shrink dramatically to a manageable level.
The only reason we think the deficit will increase is because the top Congressional leaders have said they refuse to follow the deficit reduction laws created by previous Congresses. Of course we are expected to believe that if this Congress reached a grand bargain all future Congresses will magically be more deferential to what their predecessors did.
Photo by petejordan under Creative Commons license.