President Obama swung for the fences, instead of at Republicans, in his State of the Union address Tuesday. He proposed sweeping reforms on several domestic fronts, from immigration to gun control to taxes to early childhood education. But the president neglected the sweeping change needed to confront the country’s dangerous long-term debt. Most troubling of all: It was an intentional negligence.
Obama, along with many Democrats, believes that it’s enough to merely stabilize the debt for now instead of reducing it. That would take $4 trillion in savings over the next 10 years, economists believe, and thanks to $2.5 trillion in spending cuts and tax increases that Congress already has passed, the White House thinks we’re more than halfway there.
On Tuesday, Obama proposed that the additional $1.5 trillion be found with modest reforms to Medicare and the closing of tax loopholes for wealthy Americans. He wisely resisted the notion of finding savings through $1.2 trillion in automatic “sequester” cuts due to take place in March. Those imprecise cuts would threaten military readiness and cost thousands of jobs in an already fragile economy.
But the debt ultimately poses a far more catastrophic danger. Here’s why: Even if the White House and Congress work out a deal this year for the additional $1.5 trillion in savings, the debt would remain above 70 percent of gross domestic product. That’s the highest level in U.S. history except for the years after World War II, and as baby boomers start to retire en masse at the end of this decade, it will spike even further without meaningful reform to Social Security and Medicare.
By then, interest on the debt could reach $1 trillion a year. Medicare and Medicaid costs will keep skyrocketing, and the government will continue to borrow trillions more to meet its obligations. It was an unsustainable path three years ago, when Obama appointed the Simpson-Bowles Commission to tackle the issue. The goal then: Get the debt to 62 percent of GDP. We’re moving in the wrong direction.
That’s not to say that lawmakers should choose the drastic path proposed by House Republicans, who believe they can save $4 trillion over 10 years without touching defense budgets or raising taxes. That would necessitate severe cuts on critical domestic programs and stagger the economy.
What’s the alternative? Serious, long-term reform to Medicare and Social Security. Significant tax reform that includes closing costly tax loopholes. Strategic long-term spending cuts. The Bowles-Simpson plan has long offered such a blueprint, but Obama’s only nod to it in Tuesday’s address was as a point of comparison to his own modest Medicare cuts.
The president’s speech did lay out a powerful case for reforms in education and climate control, and in a welcome surprise he announced a non-partisan commission to examine voting difficulties. Obama also demanded that lawmakers vote on gun control measures, and he offered productive encouragement to bipartisan efforts at immigration reform.
It was, as State of the Union addresses tend to be, an optimistic speech, a portrait of the promise our country can reach. But on the issue that most threatens to steal that promise, the president fell far short.