Solow Says National Debt Outlook Depends on Social Security and Medicare
If the Republican primaries were held in late June or early July, the national debt would have been far and away the most important issue.
Washington, D.C., was bogged down in political rhetoric and doomsday prophecies as Congress struggled to raise the debt ceiling so the U.S. could pay its bills.
Choosing a Republican candidate would have been difficult, as nearly the entire field talked up his or her ability to rein in spending and voiced their distaste for raising the debt ceiling.
But the debt-ceiling crisis was averted, and the hot issue moved on. But debt and deficit issues never strayed far from voters’minds. Voters aligning with the tea party movement placed even greater emphasis on the national debt.
Justin Holmes, an assistant professor of political science at the University of Northern Iowa, said concerns about the national debt tend to rise and fall in cycles. Current concerns about the debt, however, have been magnified by European debt problems and a downgrade of one credit rating of the U.S.
All of the candidates propose steep spending cuts, some spelling them out in more depth than others.
Newt Gingrich loves to lean on his record in the House, particularly when he took over as speaker in 1994, when it comes to the national debt. Gingrich and the Republicans passed a balanced budget plan then, only to have it vetoed by President Bill Clinton. He later worked with Clinton and Senate Democrats to get a balanced budget passed.
“We went from $2.2 trillion in projected deficits over a decade to $2.7 trillion projected surplus when I left,” Gingrich said during the Sept. 22 debate in Orlando, Fla. He went on to say the current debt situation is worse, but the country can get back on track. “I believe it is doable, but it takes real leadership.”
Mitt Romney supports deep cuts in the budget, wanting to set a spending cap at 20 percent of the gross domestic product, down from 25 percent today. He emphasizes growing the economy as the key to balancing the budget and working at the debt, however.
“The idea of just cutting and cutting and taxing more, I understand mathematically those things work, but nothing works as well as getting the economy going,” he said at the Nov. 11 debate in New Hampshire. “Get Americans back to work. Get them paying taxes again. Get corporations growing and investing in America.”
Gingrich also talks often about how the economy needs to take off to allow for real debt reduction. Holmes, the UNI professor, thinks the two candidates are on the right track.
“It’s a longer-term problem. Most economists will say in the short term it’s the wrong time for large cuts. If we can get the economy growing, we will see less of a problem with the debt-to-gross domestic product issue,” Holmes said.
Ron Paul, who is polling in second place in some polls in Iowa, has clear plans for reducing the deficit. He draws applause every time he mentions cutting five departments from the federal government. The Texas congressman has touted his plan to cut $1 trillion from the budget in his first year and balancing the budget within three years.
When Michele Bachmann appeared before a hall crowded with University of Northern Iowa students at an education forum earlier this month, she spoke of how she didn’t want to throw money into federal spending on education and student loans. But she did tell students that the federal government needs to cut down on the national debt to clear the way for a brighter future for today’s young people.
“Their tax rates won’t be our tax rates. Their tax rates someday in their peak earning years could be 75 percent,” Bachmann said at the New Hampshire debates. “Who’s going to get out of bed in the morning when tax rates are 75 percent?”
She sees repeal of the federal health-care law as a crucial first step to cutting 40 percent of the federal budget.
Rick Perry and Rick Santorum have called for severe budget cuts. Like the rest of the field, they support a balanced budget amendment. Perry sees it as a core component of fiscal responsibility. In the New Hampshire debates, Perry said the next president needs to make that a priority and spend time making sure it happens.
The largest budget items, in order, are Medicare/Medicaid, Social Security, and national defense.
University of Iowa economics professor John Solow said the real long-term impact on the national debt depends on changes to Medicare/Medicaid and Social Security.
“We have known for some time something needs to be done with Social Security and Medicare. This has been on the radar screen forever,” Solow said. “Some combination of reduction in benefits and increases in revenues has to happen. There is no magic bullet or magic wand to make this go away.”
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