14 April 2011


Everyone acknowledges that the US is running up an unsustainable debt and clearly the time for budget and entitlement reform is now. There are a number of proposals on the table now, including those of Rep. Paul Ryan, Chairman of the House Budget Committee, the bipartisan group of six senators working on a compromise, what was finally put forward by President Obama, and his own deficit commission headed by Alan Simpson and Erskine Bowles. Unfortunately the President has largely ignored the proposals of the latter, and gave a disappointingly partisan speech outlining his own position, which sounded more like campaign rhetoric than thoughtful consideration of the problem.

Yet somewhere between all of the above there is a solution that ought to be reached by consensus. The timing and window of opportunity will never be better, but it is rapidly closing as we move towards the presidential campaign. The opportunity is here because the government is divided between parties, with Democrats controlling the Senate and Presidency, while Republicans overwhelmingly control the House. Painful choices are going to have to be made, and the only way this can occur is on a bipartisan basis; otherwise one party will attack the other for some inevitably unpopular decisions. Furthermore the baby boomers are starting to retire. That means there will soon be a mass constituency that will be resistant to any kind of Social Security and Medicare reform, even if these only apply to subsequent generations. Demagogues will have a field day and the chances for any meaningful reform will disappear, at least until bankruptcy.

It may be too much to hope that politicians will rise above partisan posturing and come up with some truly bipartisan solutions. Were this to happen on his watch the president would receive a lot of credit, both currently and historically. Unfortunately in his first pronouncement on this he has instead taken the low road rather than rising to the occasion. However, if the congress comes up with a solution my guess is that he will go along with it. For what remains inescapable is that these problems must be dealt with now.

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