Columnist Opinion USA TODAY

The U.S. is broke. Here's why

Decades of political promises made by profligate Congresses have left us with less budget give than at any time in U.S. history.

By Gene Steuerle

In his State of the Union address tonight, President Obama no doubt will promise to attack the deficit. He has already ramped up talk of "fiscal responsibility," including his just-announced plan for a three-year freeze on "non-security" spending. All that is well and good, given our deepening debt and dependence on unfriendly foreign governments. Trouble is, the deficit is only a symptom of a chronic disease that strikes at the very heart of democratic government.

The disease? Fiscal sclerosis — setting future national priorities in stone long before the future has arrived. Our fiscal arteries are so clogged and hardened that to do anything new, meet any emergency, or engage any new opportunity, the president must renege on past legislators' promises regarding Medicare, Medicaid, Social Security and other such entitlement programs. If he doesn't address unsustainable promises head-on, Obama will have no wiggle room in the budget for the rest of his presidency, and government will be tied up with yesterday's problems and the demands of yesterday's voters.

Thanks to decades of promises for ever-higher benefits and low taxes for the indefinite future, there's now less give in future budgets than at any point in American history. At least profligate Congresses in the past confined their excesses and temporarily large deficits to the current year. Until recently, they didn't box in the future.

To see what little give we have left, take a look at the nearby "fiscal democracy index" that I built, along with my former colleague, Tim Roeper. This downward-drifting squiggle shows how much of current revenues remain after taking account of commitments by law to the programs and ideas of the past — even dead — policymakers.

Look closely. As the amount we can spend on the new and the unforeseen shrinks, so does each generation's democratic control of social and economic priorities. Gradually, over decades, Americans have committed almost all government revenues to what policy nerds call "mandatory programs" — those whose funding and funding growth are set by past laws — and to interest on the debt.

Unsustainable deficits

For the first time in U.S. history, in 2009 every single dollar of revenue was committed before Congress voted on any spending program. Meanwhile, most of government's basic functions — from justice to education to turning on the lights in the Capitol — are paid for out of swelling, unsustainable deficits.

Blame the recession for some of this dip. But even a recovery only temporarily restores a bit of financial freedom, not enough to reverse the downward trend.

No more annual appropriations are needed to fuel this vicious cycle. On our current path, Rip Van Congress could take a 50-year snooze, and the entire budget (and then some!) would still be spoken for. Tax revenues would rise with economic growth, but not as fast as spending and deficits.

The index is poised to enter the dead zone again later this decade under current law if the president and the Congress don't take more spending and tax subsidy programs off the automatic growth path and then match up revenues to whatever size government they think is right for the times. In particular, they must constrain, cap or set triggers on how much future health, retirement and tax subsidies — the big ticket items — can grow without any vote by Congress.

Both Democratic and Republican presidents and Congresses have presided over this shocking decline — fighting mainly over which downward path we'd take: by cutting revenues without reducing spending or increasing spending without raising revenues commensurately.

Certainly, President Obama didn't create this predicament — whatever the ultimate deficit impacts of stimulus spending and health reform, his two major initiatives to date. But he doesn't have the option of behaving like his predecessors. For instance, President George W. Bush accommodated the disease by paying for neither lower taxes nor new permanent drug benefits.

President Bill Clinton and the Congresses of his time tackled some deficits but eventually kicked the can of ever-growing health and retirement benefits down the road. By the time Obama took office, we had basically taken democracy — the right to have lawmakers represent our real interests — out of the hands of newly elected officials.

It's bad politics, too

Why is trying to control the future this way such bad economics? Imagine a business signing 50- and 100-year contracts that tied up all the hoped-for future revenues. It can't foresee the future well enough to make those commitments, and it would miss out on opportunities to use the money more wisely.

Hogtying fiscal democracy is also bad politics. The bind created by past presidents and Congresses has certainly hamstrung President Obama. The sole way he could try to get health reform passed and make his mark is to take back some promises of past Congresses, including that for rapidly escalating Medicare payments. Unless he addresses the basic disease, he'll be fighting this same battle on every new initiative, including deficit reduction.

Yes, the president would pay a political price up front by admitting that we've all been promised far more than government can deliver. But he — and we — stand to gain much-needed flexibility from here on out if we contain the growth in mandatory benefit and tax programs that swamp the budget without addressing current needs. The alternative isn't pretty — year after year of chipping away at past promises simply to accomplish limited objectives and getting caught short when emergencies strike. Nothing less than the ultimate success of his presidency, and our fiscal future, is at stake.

Gene Steuerle is the Richard B. Fisher Fellow at the Urban Institute in Washington, D.C., and author of the online column The Government We Deserve.

Posted at 12:16 AM/ET, January 27, 2010 in Federal budget - Forum, Forum commentary
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