When former Minnesota Gov. Tim Pawlenty spoke at the “deficit-free America” summit hosted by Strong America Now on June 18, he, like most speakers, pledged to cut spending and balance the budget. And like most speakers he lacked any realistic, long-term solutions. While President Obama has not produced any of his own solutions, voters need to be wary of simply choosing the candidate who provides the most radical rejection of Obama. A simple repudiation of the budgetary status quo will not fix our fiscal issues.
Government debt has negative effects on the American economy, most notably on credit and currency markets, but there is nothing inherently harmful about a federal deficit or even a small amount of debt. The problem is consistent large deficits, which can cause the government to default on its debt, raise taxes, or cut spending so excessively that its fiscal policies stifle economic growth.
The amount of publicly held debt most industrialized economies can incur before experiencing negative effects is around 90 percent of Gross Domestic Product. Our current publicly held debt, accrued by an economic downturn, two wars, and two consecutive presidents with no reasonable long-term budget plans, is more than $9.5 trillion, which is about 66 percent of U.S. GDP. It’s not an economic cataclysm — the United States has such a large economy that it could probably afford to take on even more debt — but the rising debt is a trend that needs to be quickly and substantially reversed if we want to avoid more severe economic problems.
Therefore, wasting time by setting politically driven one-time reduction targets and whining about minuscule appropriations is a distraction from real issues. Candidates need to show a willingness to reduce the costs of foreign wars and to cut our spending in the areas that make up two-thirds of the federal budget: the hallowed but bloated institutions of Medicare, Social Security, and the Department of Defense. The challenge is doing it without compromising security or American quality of life.
The need for realistic solutions rules out any candidates who claim that lowering taxes will actually increase government revenue (the Bush tax cuts refute that claim, and Reagan’s administration racked up more debt than any president in history until Bush Jr.) and any candidates who don’t see the importance of streamlining federal spending. My former governor, Tim Pawlenty, is a clear example of why voting for a candidate based solely on his criticism of Obama is a mistake.
Pawlenty has made it very clear that his management of the budget would be drastically different than the current president. He would propose no tax increases and drastically cut spending. He touted the balanced budget he left for Minnesota but didn’t mention that he used accounting gimmicks. His tax policy forced him to balance the budget by borrowing $1.4 billion from Minnesota schools and using $920 million of federal stimulus money, which created a structural deficit for his successor. If Pawlenty gets to the White House and balances the budget using the same shoddy methods, he will leave America’s finances worse than he found them.
The rising federal debt is a problem that will be solved neither by simply by raising taxes on the top income brackets nor by drastically cutting vital government services. A superficially balanced federal budget isn’t a magic bullet for fixing the economy. America’s next president needs a plausible plan for steadily paying down our national debt and keeping it at a manageable level, not just a plan to capitalize on current anti-government sentiment or a superficial track record. Voting for the candidate who yells the loudest about Obama’s budget management with no real solutions isn’t going to fix anything.