EconomistMom.com

The Concord Coalition just released an issue brief today, “Setting Expectations: Why Baselines Matter in the Presidential Campaign and for the Fiscal Future.”  It’s our take on why people should pay attention to the new CBO budget projections, and CBO’s official, current-law budget baseline, yes, even in the heat of the presidential campaign when there are more frivolous and sexy things to talk about.

Readers here will recognize many of the numbers.  I brought my “Buffett Pie” stories into it, as well as my “basic math” analysis of the candidates’ fiscal policy proposals.  But my favorite part of the paper is in the conclusion where we try to connect the issues of the CBO projections, pay-go rules, intergenerational equity, economic growth, and the presidential election, all within the container of a call for “fiscal courage”:

The deficit status quo is unacceptable. Not only should policymakers strictly enforce paygo, they must also begin taking steps to close the long-term unsustainable gap between revenues and promised benefits for Medicare and Social Security. The fact that we’ve had higher deficits before as a percentage of the economy and managed to dig our way out offers no reason for complacency…

Balancing the budget is not an end in and of itself, but a means to an end. A balanced budget provides evidence of sustainable fiscal policy and responsible governance…

Over the next 10 years there will be two presidential elections and five congressional elections. Without a firm commitment to fiscal discipline backed up by budget enforcement rules, deficits are more likely to increase than decrease. Budget process tools, such as statutory limits on discretionary spending and paygo, helped policymakers achieve a balanced budget in 1998 and for three years thereafter. The need for such rules is even more acute now.

Expiration of the 2001 and 2003 tax cuts at the end of 2010 likely provides our first test of fiscal courage. It does not require letting all the tax cuts expire, and it does not require raising marginal tax rates to pay for the tax cuts we choose to keep. But whatever tax cuts we do want to keep, we ought to be willing to pay for them in ways that keep revenues at baseline levels (or make up the difference with spending cuts), and in ways that make economic sense-both for today’s economy and especially for our children’s economy. Having the next Administration and the next Congress stick with (and maybe even strengthen) pay-as-you-go budget rules would be a great step toward making that happen.

What is striking about the current budget debate is the obvious lack of any consensus within the Congress about priorities and the goals of fiscal policy. Whereas successive deficit reduction legislation in the 1980s and 1990s focused on revenue increases as well as spending restraint, the current, exclusive emphasis on spending cuts threatens to undermine serious efforts to address fiscal imbalance. The presidential candidates currently suffer from this same, unrealistic fiscal policy strategy, proposing levels of tax cuts that seem inconsistent with deficit reduction, given their other economic policy goals. We can only hope that when the next president takes office, some of these campaign promises will give way to economic reality.

Pressures are mounting throughout the economy-on private firms as they attempt to address problems with their global competitiveness including the cost of health care and retirement benefits for their employees; on baby boomers, many of whom are balancing the need to support children as well as aging parents; and on state and local governments that are struggling with their own fiscal gaps.

The ability of the federal government to be the “insurer of last resort” and to be in a position to address emerging national needs is compromised by the policymakers’ inability to confront the budget’s shortcomings. That injects uncertainty and instability into the economy, when what is required is decisive leadership. The result is fiscal insecurity for both current and future generations.

We provide a link to the data underlying Concord’s “plausible baseline” scenario.  The scoop there is that when you compare the current-law baseline with a policy-extended (”plausible”) baseline, you find that the much larger deficits under the policy-extended scenario ($7.8 trillion in deficits over 10 years, vs. $2.3 trillion under current law) are mostly explained by deficit-financed extension of the tax cuts (2001 and 2003 cuts, and AMT relief).  That’s why we think that policymakers need to show their fiscal courage and stick to pay-go–i.e., show a willingness to pay for the tax cuts they want to keep–when the issue of the expiring tax cuts comes up in 2009-10.

I guess I’m saying that it’s what’s on the inside of these politicians that will ultimately matter for the fiscal future of our country.  Lipstick or not, I’m hoping the politicians who end up winning in November will turn out to have the hearts of ”Blue Dogs” (more than pit bulls or pigs) inside.