The consensus around debt reduction is beginning to crumble. Some straws in the wind are more careful attention to the actual numbers, as well as public conversions by such key players as Larry Summers and Peter Orszag, two former top aides to President Obama, who only yesterday were key members of the deflate-your-way-to-recovery club.
Summers wrote a piece in Wednesday's Financial Times titled "End the Damaging Obsession with the Budget Deficit," pointing out that the more serious deficits were in jobs, wages, and infrastructure.
His former colleague Orszag wrote a piece pointing out that the rest of the budget is in decent shape-the huge outlier is federal health care costs, projected to rise from 5.5 percent of GDP now to 12 percent by 2050.
President Obama, in his second inaugural address, had little to say about deficit-reduction as some kind of panacea and more about broadly-shared recovery.
In the era of the Bowles Simpson Commission, the Peterson Foundation's regular emergency fiscal summits, and President Obama's own conversion to the deficit-hawk side (2010-2011), a number was regularly tossed around: $4 trillion. That was the amount of deficit reduction over a decade supposedly necessary to stabilize the debt-to-GDP ratio.
Left out of these calculations was the fact that too steep a path to deficit reduction would lower the growth rate, reduce revenues, and widen the deficit anew. But as experts have taken a closer look at deficit-reduction already legislated, it's increasingly clear that so much deficit cutting has already occurred that we are almost at the point where the debt ratio stabilizes without further cuts.
Richard Kogan of the Center on Budget and Policy Priorities calculates that only $1.2 trillion of additional cuts over a decade (counting interest savings) would stabilize the debt ratio, and the Economic Policy Institute reckons that the number could be half that much. Get economic growth up slightly, and no further deficit-cutting is necessary at all.
Ezra Klein had a nice piece ratifying the shift.
But what about those relentless increases in federal health spending. Don't we need a drastic solution, like raising the Medicare eligibility age? The United States is a total outlier when it comes to health costs, spending nearly double what the typical advanced nation spends, and getting less care for a smaller share of the population.
That's because our commercialized health system spends too much money in the wrong places, chasing profits, adding middlemen costs, and foregoing public health gains.
Though health experts propose a lot of tinkering, the only solution is national health insurance. The fact that this approach is considered outside the mainstream will keep the debate focused on cuts rather than on fundamental reform.
So the good news is that the debate is moving away from deficit reduction. The bad news is that the single most fundamental reform both to our health system and to our perceived spending problems is off the radar screen.
The other piece of ambiguous news is that keeping spending constant and spurning further deficit reduction will prevent needless economic contraction, but will not spur the kind of broad recovery we need. That will take significant public investment, financed both by borrowing and by more taxation of the wealthy-another topic that cannot quite be mentioned in polite company.
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Given the continuing obsession with the Republicans and the Fix-the-Debt lobby with deficit cuts, it would be good if President Obama were even stronger on the point that we've had all the deficit cutting that we need and that the economy can stand, and that health reform is whole other story.
But at least the fiscal debate is starting to move in the right direction, the deficit-hawk echo chamber in the media is no longer mindlessly repeating the Peterson mantra, and that's good news indeed.
