A Cure for Acute Deficit Disorder?

For the past 15 years, the United States has been afflicted by a chronic ailment, one that has had a pervasive influence over American politics. Call it deficit disorder.

The condition first appeared in 1982, when the federal budget deficit jumped to more than $ 100 billion for the first time. What caused deficit disorder? President Reagan and Congress made a deal to cut taxes, but not spending. So predictably, the deficit mushroomed, reaching a peak of $ 290 billion in 1992.

Deficit disorder has claimed many victims over the years. The first was Walter F. Mondale, who told the Democratic National Convention back in 1984, ''Mr. Reagan will raise taxes, and so will I. He won't tell you. I just did.''

After 1984, Congress decided to do something about the deficit. No, they didn't cut spending. They passed the Gramm- Rudman law, saying that if Congress and the President could not agree on deficit reduction targets, automatic spending cuts would go into effect. What Congress did was point a gun at its own head and say, ''If we can't balance the budget, we're going to shoot ourselves.'' Nobody believed them.

Instead, what Gramm-Rudman did was provoke the 1990 budget crisis, in which President Bush agreed to a tax hike, citing ''fears of the economic chaos that would follow if we fail to reduce the deficit.'' Bush became the next victim of deficit disorder.

In 1992, two national candidates proved you could get votes on the deficit issue. One was the late Paul E. Tsongas (''Where's the money going to come from? With a $ 400 billion deficit! They're going to borrow the money from my kids! That is pandering!''). The other was Ross Perot (''The debt and the deficit are no longer a crazy aunt we keep in the basement and nobody talks about'').

Bill Clinton got the message. When he took office in 1993, he declared himself a born-again convert to the cause of deficit reduction. He, too, called for a tax hike in his first budget message to Congress. Congressional Democrats passed it without a single Republican vote. A year later, they, too, became victims of deficit disorder.

One rule had clearly been established: Raising taxes to reduce the deficit was political suicide. Raising taxes to reduce the deficit was political suicide.

So the Republicans took over Congress in 1995 and provoked a showdown over spending cuts. President Clinton refused to make a deal. ''Once again,'' he charged, ''they are threatening to shut the government down if I do not accept their deep cuts in health care, education and the environment.'' The public sided with the President, and a second rule was established: Cutting popular programs to reduce the deficit is political suicide.

What to do next? Why not declare the deficit unconstitutional? ''The first bill we will file today is the balanced budget constitutional amendment,'' Senate Majority Leader Trent Lott, R-Miss., said in February. ''It is fundamental. It's the right thing to do.'' But that didn't work either. Rule three: Don't fool around with the Constitution.

Having seen the Democrats fail after 1992 and the Republicans fail after 1994, Americans voted for balance in 1996. Not gridlock--balance. They voted for what they really wanted all along: a balanced budget with no tough choices. And guess what happened? They may get it.

The Congressional Budget Office saved the day by informing negotiators that the robust economy would pump more money than expected into the Treasury. One critic, Sen. Phil Gramm, R-Texas, said, ''I think people are going to be disappointed when they find out the budget is balanced only because we assume it is balanced.'' No, they weren't. As Ronald Reagan discovered, rosy scenarios can take you a long way.

A mid-May CNN-USA Today-Gallup poll shows 2-1 public support for the deal (50-26 per cent). Clinton promised he would support a budget agreement only if it had the backing of a majority of congressional Democrats. Suppose we apply that test to rank-and-file Democrats. Do most Democrats in the country back the deal?

The answer is yes. The poll shows 58 per cent support among rank-and-file Democrats, which is even higher than the 48 per cent of Republicans and 42 percent of independents who support it. The President's popularity is selling the agreement to a lot of Democrats who might otherwise be suspicious.

The budget deal ratifies the public's consensus about the role of government. Number One: Don't mess with entitlements such as Social Security and Medicare. Two: Keep defense spending fairly steady. Three: Give us as many tax cuts as we can afford. Four: Give us as much spending on domestic social programs as we need but no more than that. Those four points are all enshrined in the deal.

But why did it take 15 years to get here? Because each party had to try to do it its way first and then fail. Moreover, the economy had to turn around enough to make a painless deal possible. In the poll, Americans who say the economy is in good shape are much more likely to favor the deal. It's easier to sell sacrifice when people are feeling flush.

Of course, if the rosy scenarios don't hold, neither does the agreement. There's one final rule, and it's a familiar one: Stuff happens. A recession could happen. The current economic recovery is now six years old. If we get all the way to 2002 without a recession, it will be a record. The latest news has unemployment below 5 per cent for the first time since 1973. Maybe we've repealed the business cycle.

A sudden spurt of inflation would drive up interest rates and increase the cost of servicing the national debt. So far, however, prices have been remarkably stable. Nobody talks about a war. Or another savings and loan crisis. But they happened. Natural disasters happen, too. Suppose ''the Big One'' were to hit California. Nobody's predicting anything like that, except in the movies.

Only one thing is sure to happen: Baby boomers are going to get older, and they're going to retire. Paying for their Social Security and Medicare will be a real budget-buster. Which is why entitlement reform is the next big challenge.

William Schneider is a resident fellow at AEI.

Also Visit
AEIdeas Blog The American Magazine

What's new on AEI

AEI Election Watch 2014: What will happen and why it matters
image A nation divided by marriage
image Teaching reform
image Socialist party pushing $20 minimum wage defends $13-an-hour job listing
AEI on Facebook
Events Calendar
  • 20
  • 21
  • 22
  • 23
  • 24
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.