Few problems receive as much lip-service and as little follow-through from political leaders as the budget deficit – a source of voter anxiety that once again appears to be a fount of broken promises in the presidential election.
Earlier this week, Republican presidential candidate Mitt Romney in New Hampshire to “show America that this team can put America on track to a balanced budget and stop the deficit spending.” But, neither Romney nor Paul Ryan, his running mate, the House Budget Committee chairman, will commit to exactly when those surpluses would start, as campaign officials have backed down from earlier pledges to eliminate the deficit by 2020.
President Obama claimed during the 2008 presidential campaign that he would halve the federal deficit by the end of his first term, with the expectation he would finish the job by 2016. Now he says that timeline has been pushed back. “We’re not there because this recession turned out to be a lot deeper than any of us realized," Obama told an Atlanta television station in February. “So, the die had been cast, but a lot of us didn’t understand at that point how bad it was going to get.”
THE HOLY GRAIL
A balanced budget was once the Holy Grail of the GOP. But it took Democratic President Bill Clinton, under pressure from Republicans, to put the government on track to four straight years of surpluses, between 1998 and 2001. Last summer, some congressional Republicans were willing to risk the first default in U.S. history to try passing a balanced budget amendment to the Constitution in exchange for votes to raise the debt ceiling.
But in the wake of the Great Recession along with the threat of falling off a fiscal cliff, four key issues are all but evaporating serious talk about balancing the budget:
• A bipartisan surge of support for increased defense spending
• A warning from CBO about extending the Bush Tax cuts
• A GOP push for enactment of another round of tax cuts for the wealthy
• A looming election to determine control of the White House and Congress
As the 2012 campaign picked up steam, lawmakers, political analysts and budget experts shifted to the far more manageable goal of stabilizing the rate of growth of the national debt. Federal debt as a percentage of Gross Domestic Product soared as the economy worsened and emergency spending increased – and it now totals $15.9 trillion. Getting the annual deficit under control became more important to policy makers than wiping it out.
“Balancing the budget kind of dropped out of the conversation in favor of the more urgent and doable goal of stabilizing the debt,” said Alice Rivlin, the first director of the Congressional Budget Office who has served on the Simpson-Bowles presidential fiscal commission and a Bipartisan Policy Center fiscal taskforce. “Then the question became, what do you stabilize it at? And the answer was, ‘Oh, well, about 60 percent of GDP,’ which seemed like a pretty good target.”
“It’s amazing how quickly the deficit went from around $160 billion in 2007 to over $1 trillion in the last several years,” lamented Robert Bixby, executive director of the Concord Coalition, a fiscally conservative advocacy group. “But the economic consensus is you don’t want a balanced budget in these times because it would slow the economic recovery. So even most traditional deficit hawks – myself included – would still say that until the economy recovers, you don’t want to get carried away with tax increases or spending cuts.”
The evolution of modern deficit politics has been dramatic over the past two decades. During the Clinton-era surpluses brokered with congressional Republican leaders, there was rampant interest on Capitol Hill in balanced budget amendments, spending caps, “lock boxes” and other gimmicks for controlling spending. That ended abruptly after the 9/11 terrorist attacks – producing a flood of red ink caused by two wars, two major Bush-era tax cuts, massive spending on homeland security, and the 2008 financial meltdown that drove deficit spending under Obama to levels last seen during World War II.
The government spree resulted in a showdown last summer over the debt ceiling between Obama and House Speaker John Boehner, R-Ohio, in which the government borrowing cap was lifted at the last minute in return for roughly $2.5 trillion in long-term savings and spending cuts. And both the House and Senate rejected proposals in late 2011 for a balanced budget amendment.
“It’s not as though [a balanced budget] isn’t discussed by politicians any more,” said Richard Kogan, a senior budget analyst with the left-leaning Center on Budget and Policy Priorities. “The issue is whether it’s discussed seriously.” Closing the deficit too quickly would generate the kind of economic turmoil that’s occurring in Greece, Italy and Spain, where fiscal austerity pulled those nations back into troubling downturns.