For several years now the president has told us he believes in a “balanced approach” to reduce the debt and deficit. When he had to be specific he suggested $2.5 in spending cuts for every $1 in new tax revenue. Considering that in the fiscal-cliff deal he got roughly $630 billion in new tax revenue, that means that to keep his promise the president must now cut some $1.5 trillion. These cuts should, of course, come on top of the implementation of sequestration which was one of the conditions for raising the debt ceiling last time around.
Now, we can debate whether or not using the need to raise the debt ceiling as leverage is the right way to go about getting the president to deliver on his promise. I have some sympathy for the arguments made by Reihan Salam and Philip Klein that it is not an ideal option and should be avoided. Besides, defaulting should not be on the table, making the leverage of the debt-ceiling fight relatively small anyway.
But as Yuval Levin rightly notes this morning, raising the debt ceiling without a gesture to improve our long-term debt problem may not be an option. Earlier this week, Fitch warned the U.S. government that while it wants the debt ceiling to be raised, it also wants the government to come up with a credible medium-term deficit-reduction plan. Without it, the agency could downgrade the U.S. credit rating by the end of this year.
My concern right now is that the way Republicans are handling the debt ceiling—and every short-term crisis—may end up being a distraction from achieving what should be their long-term goal of putting the country on a sustainable path. Here is why: Ultimately, the government will need to raise the debt ceiling. In fact, if we don’t reform entitlement spending growth we will need to raise it again many times. There is no other option. Without changes, spending as a share of GDP is projected to almost double over the next 30 years (from 23 percent today to 40 percent in 2045). The gap between revenue and spending will grow considerably, causing the public debt to grow from 70 percent of GDP today to about 250 percent by 2045. So in a sense this fight over raising the debt ceiling is merely symbolic if Republicans’ greatest demand is nickel-and-dime discretionary spending cuts. Don’t get me wrong, I am all in favor of fighting for any spending cuts. But the real fight is about addressing our long-term problems, which will require significant reform to the drivers of both our spending and debt: Medicare, Social Security, Medicaid, and the new health-care entitlement.
Unfortunately, unless I am missing something, I do not see lawmakers fighting that long-term battle at the same time as they are expending lots of energy trying to avoid sequestration cuts.