The virtue of balancing the budget is that it forces people to weigh the benefits of government against the costs. It’s a common-sense standard that people intuitively grasp. If the Deficit Commission is serious, it will set a balanced budget in 2020 as a goal, allowing time to phase in benefit cuts and tax increases. It will then invite think tanks (from the Heritage Foundation on the right to the Center on Budget and Policy Priorities on the left) and interest groups (from the Chamber of Commerce to the AARP) to present plans to reach that goal. Their competing visions could jump-start a long-overdue debate on government’s role.
The odds seem against this. The Deficit Commission may embrace debt-to-GDP targets and aim for a “primary balance” (excluding interest payments), because it’s easier politically. Consider. In 2020 the deficit will be $1.254 trillion on spending of $5.67 trillion, projects the Congressional Budget Office. Closing that gap would require steep tax increases or deep spending cuts. But $916 billion of the projected deficit represents interest payments. Ignoring them instantly “solves” three-quarters of the problem.
The message from Europe is that this approach ultimately fails.