Back to Work - Bill Clinton [23]
Of course, when normal economic growth returns and employers start hiring again, the costs associated with surviving the recession will go down and tax revenues will increase. Nevertheless, according to the Congressional Budget Office, with the retirement of the baby boomers, the oldest of whom turn sixty-five this year, and inflation in health-care costs back with a vengeance, the debt is projected to grow to 100 percent of GDP by 2021 and almost 200 percent by 2035.
We can’t let this happen. If it does, interest rates will explode, our GDP will be reduced, and our children’s future will be compromised. There are only three things we can do to turn the debt problem around before it becomes a crisis: restrain spending below current projections, raise taxes, and grow the economy faster. We have to do all three. This chapter is about the first two.
As the bipartisan National Commission on Fiscal Responsibility and Reform, usually referred to as the Simpson-Bowles Commission, has recognized, we shouldn’t take a big bite out of the annual deficit and the total debt until the economy starts to grow again, but as reasonable growth returns, we do need to implement a serious long-term plan to reduce the debt. What should be in it?
A. Cutting Spending
When I was growing up, most everyone I knew was familiar with a wisecrack attributed to the famous bank robber Willie Sutton. When asked why he robbed banks, he replied, “Because that’s where the money is.”
In the federal budget, as mentioned earlier, the money is in Medicare, Medicaid, Social Security, the military, and interest on the debt. The only thing we can do about interest payments is to reduce our debt as a percentage of national income by growing the economy and cutting the deficit. In times of normal economic activity, the budget should be balanced or, if we want to pay the debt down to increase America’s economic independence, in surplus. During recessions, deficits are almost inevitable because government income drops and, even if there’s no stimulus program, spending goes up because so many people need help just to survive. Remember, in this recession as many as 15 percent of Americans have qualified for and used food stamps.
As for the defense budget, you can expect military spending, including spending on private contractors, to drop as the wars in Afghanistan and Iraq wind down. To their credit, congressional Republicans have altered their original “no defense cuts” position and agreed to the Pentagon’s request to eliminate a contract to build backup engines for the new Joint Strike Fighter because the plane’s manufacturer can build all the engines needed. Bipartisan support for this cut will save up to $3 billion. The Pentagon, including the Marine Corps, also wants to cancel the proposed amphibious Expeditionary Fighting Vehicle, which the corps says it doesn’t need, at a savings of $9 to $10 billion. It is questionable whether we still need eleven aircraft carrier battle groups, given the likely deployments of the next several years and the fact that no other navy has more than two. The elimination of even one would save $11 billion.
THE TRICARE HEALTH PLAN, AVAILABLE TO all veterans, has a very modest enrollment fee with modest co-pays and no deductibles.3 We could switch to a sliding scale based on income and raise a fair amount of money, as long as we do it without putting more burdens on veterans returning from combat with bleak job prospects or disability conditions, including post-traumatic stress disorder and other wounds sustained in service to our nation. The unemployment rate for veterans exceeds 12 percent, 25 percent above our national rate of 9 percent, and more than 200,000 veterans have head injuries, mostly from exposure to IEDs, the improvised explosive devices commonly called roadside bombs.
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