Debate Club

A Balanced Budget Isn't Necessary, But Entitlement Reform Is

By SHARE

The federal budget deficit should be sustainable given future growth and inflation expectations, not necessarily zero, much like there is no need for corporations to be financed with equity alone. At nominal interest rates of 0.5 percent, deficits of the size we are facing at this moment are quite sustainable. Cutting spending or, even worse, raising taxes again, in a slowly recovering economy and an environment of high and often long-term unemployment is counterproductive. The latter, especially, would stifle the recovery and hinder job creation.

[See a collection of political cartoons on the budget and deficit.]

That said, there are serious long-term fiscal problems that deserve our attention now. Cutting entitlement programs after they have spun out of control is much harder and more painful than reforming them ahead of time. In other words, basing your fiscal policies on the belief that the world will cease to exist in the 2023 is imprudent. Oddly enough, many liberal pundits and politicians appear to be doing exactly that. Instead of adopting a willfully blind attitude of après moi, le déluge, policymakers should adopt meaningful entitlement reform that will keep deficits sustainable in the long run as a top priority. But if it is politically impossible to enact such reform now without bribing certain factions into agreement by raising taxes in a weak economy, as appears to be the case, then it appears wiser to hold off on such reform until the political tides have changed.

Stan Veuger

About Stan Veuger Research Fellow at the American Enterprise Institute

Tags
federal budget
economy
deficit and national debt

Other Arguments

#1
68 Pts
Deficit Spending Displaces Private Economic Growth

Yes – Deficit Spending Displaces Private Economic Growth

Matthew Mitchell Senior Research Fellow at the Mercatus Center at George Mason University

#3
10 Pts
A Balanced Budget Should Be the Top Policy Priority

Yes – A Balanced Budget Should Be the Top Policy Priority

Roger Williams Republican Representative From Texas

#4
-2 Pts
Deficits Ensure the U.S. Can Protect Against Threats

No – Deficits Ensure the U.S. Can Protect Against Threats

Scott Lilly Senior Fellow at the Center for American Progress

#5
-22 Pts
Long-term Deficit Reduction Is About More Than a Balanced Budget
#6
-41 Pts
A Balanced Budget Should Take a Backseat to Real Reforms

No – A Balanced Budget Should Take a Backseat to Real Reforms

Isabel Sawhill Senior Fellow in Economic Studies at the Brookings Institution

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