ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, April 15, 1996 TAG: 9604150024
SECTION: EDITORIAL PAGE: A-4 EDITION: METRO
BACK WHEN the war in Vietnam was grinding on, Republican Sen. George Aiken of Vermont offered a modest proposal. America, Aiken said, should simply declare victory and get out.
The suggestion was facetious, but several years and many casualties later, it was more or less the Aiken formula - call it victory, regardless of the reality - by which America eventually extricated itself from a bad mess.
Today's battles against federal budget deficits add up to a much different and, happily, much less lethal kind of war. But this fiscal war also displays Aikenesque features - only in reverse. With Vietnam, the idea was to assume victory even when you lose. With deficits, the idea apparently is to assume defeat even when you win.
You wouldn't know it from the political rhetoric, but:
When this fiscal year ends in October, the federal budget is expected to show a "primary surplus'' - that is, current revenues as against current spending - of about $85 billion.
The federal government, in other words, is now a pay-as-you-go proposition. Actually, the federal government's current revenues have been pretty much in balance with current expenditures for several years - a not unimpressive feat given that, unlike other levels of government or private-sector businesses, the federal government does not amortize outlays for long-term capital projects over their useful life.
Why, then, continued deficits? Because current revenues haven't been enough to cover both current expenses and the costs of servicing debt accrued from past years, mostly the $4 trillion debt amassed from 1980 through 1992.
Since Bill Clinton took office, the federal deficit has been sliced in half, shrinking steadily from $292 billion in 1992 to a projected $145 billion for the current fiscal year.
As a short-term problem, in other words, the deficit is no longer much of one. Even more meaningful than the dollar amounts, which don't take into account population and economic growth, is the fact that the deficit this year is expected to be about 1.9 percent of the U.S. gross domestic product. That's the lowest percentage in the industrial world, and the lowest in the United States in 17 years. By contrast, the federal deficit during the 1980s peaked at more than 5 percent of the nation's GDP.
And yet we, this newspaper included, continue to worry about deficits. Why should we?
Because a cloud hovers over America's fiscal horizon. It isn't an immediate threat. It isn't ungodly waste in government operations. It's long-term, and it's called entitlement or transfer payments.
Leaving aside health care, consider just Social Security. (Someone better. Clinton and Congress aren't.)
Social Security payroll taxes have been boosted; the system currently runs a surplus. But Social Security faces big trouble when the baby boomers start retiring in another 15 years or so. The ratio of active workers, contributing dollars into the system, to retirees, extracting dollars from it, will be too low to sustain current benefit levels at current tax levels.
Still lower deficits now and in the near future would help make a Social Security fix easier. For that reason, continuing the reverse Aikenism - calling the deficit victory a defeat, and so staying engaged - makes sense.
But if it encourages the assumption that a balanced budget alone will make the entitlement cloud go away, or if it leads to the rejection of public investments necessary for a prosperous future during the baby boomers' retirement years, then continuing to focus so intently on deficits carries its own set of dangers.
LENGTH: Medium: 68 linesby CNB