I thank the Peterson Foundation for inviting me to be a part of today’s summit. There is no monolithic viewpoint among economists and policymakers when it comes to addressing our federal budget challenges. Rather, there is a diverse range of viewpoints, and I’m glad to have the opportunity to share mine.
If there is one thing we can all agree on, it should be this: Our first priority as a nation right now must be putting Americans back to work. Persistently high unemployment is taking a severe toll on families and communities. Poverty rates are skyrocketing. We estimate that the poverty rate among African-American children will exceed 50 percent as a result of this recession.
This is a reality that we should not, and need not, continue to accept. We can make investments in creating new jobs and thereby spare millions of Americans a lot of avoidable pain. We must not let concerns about the deficit stop us from making these investments. As David Walker and I wrote in an op-ed in February, “a focus on jobs now is consistent with addressing our deficit problems ahead.”
As we begin to weigh our medium- and long-term budget challenges, it’s important not to let the rhetoric outrun the economic facts. Former Senator Alan Simpson, one of the co-chairs of the President’s fiscal responsibility commission, reportedly said that we could have double-digit economic growth for 30 years and “never grow our way out of” deficits. Yet even a quick back-of-the-envelope analysis shows that this statement is untrue.
If we had roughly 5% growth between now and 2015, then we could achieve primary budget balance – the near-term goal for the President’s commission – without any changes in policy at all. Five percent is far short of double-digits. If we had 10% growth for 30 years, it would completely erase our budget gap, and we wouldn’t need to raise tax rates, address rising health care costs, or make any other changes to policy. Senator Simpson’s comments were way off the mark. There’s no reason why our budget challenges can’t be discussed free of this kind of hyperbole.
We also have to discuss the budget in the context of the larger forces shaping our economy, like increasing inequality, diminished retirement security, and rising healthcare costs. This is not a discussion about line items in a budget – it’s a discussion about Americans’ lives and livelihoods. As a country, we need a full conversation about our priorities, what it will cost to achieve them, and what we’re willing to spend.
For example, taking an axe to Social Security at a time when 401(k) values have cratered and private pensions are vanishing might solve the program’s budget shortfall, but it will only exacerbate the nation’s growing retirement insecurity. More generally, with income inequality at its highest level since the 1920’s, it would be morally and economically indefensible to attempt to solve the nation’s long-term budget problems on the backs of American workers and their families.
We face real budget challenges in the years ahead, but solutions to these challenges – solutions that uphold our values and permit us to meet our key priorities – are not out of our reach.