Deficit Reduction? Excuses, Excuses

By Michael Kinsley

THE RETURN OF ROSS PEROT HAS BROUGHT THE FEDERAL budget deficit, like an unwelcome guest, back to the center of national debate. Perot, whatever his defects, has offered a credible plan for balancing the budget over five years. The general reaction from the economic graybeards has been: fine idea, but now's not the time. To slam on the fiscal brakes in the midst of a recession, or a shaky recovery, or whatever the heck we're in, would be suicidal. Partisans of the other two candidates have grasped this argument as a defense of their considerably more modest deficit-reduction proposals.

Well, as Dana Carvey's Church Lady says, "How conveeeee-nient."

There are still some people who argue seriously that the federal deficit isn't a major problem. This Essay is not intended to answer them. It is an attempt to answer the less eccentric argument that the short-term problem of stimulating a weak economy dictates waiting a year or two before addressing this threat to our long-term prosperity. That is the consensus view of TIME own panel of economists

% The first answer to such concerns is: Are you kidding? Cut the deficit too far, too fast? We should only have such troubles. Anyone who has watched American politics during the past decade will find it hard to lose sleep about the danger of overly "drastic and quick action" (Nobel laureate Paul Samuelson) on the deficit. Why not worry that Americans will watch too little TV or eat too many green vegetables?

A real deficit-elimination plan could hardly be enacted overnight. Perot himself says it would take at least a year. And a five-year plan would suffer inevitable slippage. Look at past fiscal diets, like Gramm-Rudman. If the goal of a balanced budget actually produced, say, an annual deficit under $100 billion by the year 2000, that would be widely regarded as a spectacular success.

No one is saying the federal budget should be balanced overnight. But to say it shouldn't be balanced over five years is as good as saying it shouldn't be balanced at all. Political cycles and economic cycles both dictate this reality.

Politically, the nation's attention span is limited. Who can believe that America would stick to a course of fiscal discipline lasting eight or 10 or 15 years? A mere five years is longer than a presidential term. This means that even a five-year deadline imposes no real political accountability. In our political system, a promise to diet over five years is barely a pious wish. A promise to diet over a longer period isn't even that.

Economically, there isn't enough time for even a five-year deficit-reduction plan if the periods before, during and after recessions are ruled out. There was about seven years from the pit of the last recession to the beginning of the current one. And that, as Reaganites love to tell you, was an extraordinarily long period of growth. Perhaps you believe -- as the supply- side conservatives did during the 1980s and Keynesian liberals did for decades before -- that the business cycle has been abolished. If not, the calendar is against you: we cannot wait until full recovery from the current recession to begin serious deficit reduction and hope to have it completed before the next recession becomes an excuse to abandon the exercise.

Although raising taxes or cutting government spending or both would be an antistimulus for the economy, a credible deficit-reduction plan would have a countervailing stimulus effect of its own. Long-term interest rates would go down and productive private investment would increase, as markets became convinced that the Federal Government's voracious appetite for capital was being tamed. More amorphous factors -- a renewed optimism and confidence that the U.S. was in control of its own future -- would also have practical economic payoffs.

To be sure, a credible plan to stimulate our way out of recession for a year or two and then begin serious deficit reduction would also have these pleasant effects. But any such plan to start dieting in two years is inherently incredible.

This is not to pooh-pooh the short-term problem. The conflict between the short-term need for stimulus and the long-term need for deficit reduction is genuine. The party poopers were predicting this moment -- and being laughed at for it -- throughout the 1980s. They said the time would come when we'd need the medicine of fiscal stimulation, and it wouldn't be available. And here we are, taking massive doses of both fiscal and monetary tonics -- a $300 billion-plus deficit and the lowest short-term interest rates in a generation -- yet we're still sickly. We abused the drug while we were well; now it won't work again until we purge it from our system.

What's galling is to hear this predicament invoked as an excuse for inaction by some of the very people who put us in the predicament. Republicans who dismissed the deficit in the 1980s -- Why worry? Times are good! -- warn against addressing it in the 1990s: Not now. Times are bad!

The Democratic candidate, Bill Clinton, also uses the recession as an excuse for inadequate deficit-reduction plans. But Clinton's math is a bit more honest than George Bush's, and at least Clinton would redirect some government spending toward useful social investment. And, of course, he hasn't been part of the Administration that got us into this mess.

America is like the fellow in the song (The Arkansaw Traveler, ironically enough) who doesn't fix his roof when it's sunny and can't fix it when it's raining. Our leaders have told us there wouldn't be a deficit. Then they said the deficit didn't matter. Now they say it needs to be fixed, but not just at the moment. When?