Debt and Taxes: Will America Ever Grow Up?

In the space of a week, the chiefs of two blue-ribbon panels in Washington have put forth tough-minded proposals for reining in federal budget deficits. The ugly reality that they emphasized—no less true for being so often described or so reliably ignored—is that Americans have undersaved, overspent, and made unaffordable commitments for the future, particularly on retiree health care. The IOUs are accumulating, and if nothing is done soon, the chits will hit the fan: Creditors will stop lending money or at least demand much higher interest rates for it, as they already have in Greece, Ireland, and Iceland.

Each deficit-reduction proposal was full of serious ideas, and each was greeted by immediate and deadly sniper fire from both sides of the aisle. Postponing action is irresistible because the political blowback from doing anything meaningful is scorching. Every interest group is passionately committed to defending its own sacred cow, trampling the concept of sharing the pain for the common good. Washington, it appears, still isn't ready to grow up.

Simpson and Bowles proposed to shrink or kill the sacrosanct income-tax deduction for home mortgage interest; slash $100 billion in defense spending, in part by closing bases; freeze the pay of federal workers, excluding combat forces, for three years; raise the gasoline tax by 15¢ a gallon; cut Medicare reimbursements to doctors, hospitals, and drug companies; shore up Social Security with tax hikes and benefit cuts; and sharply curtail the growth of federal health expenditures. Rivlin and Domenici rely more on increasing revenue to balance the budget. They call for a 6.5 percent national sales tax, which they package for public consumption as a "Debt Reduction Sales Tax."

Those ringing the deficit alarm tend to be old and indignant. Peter G. Peterson, the 84-year-old retired banker, invested $1 billion in a foundation focused on fixing budget deficits, foreign debt, and entitlement spending. He ruminates about the morality of a society that leaves a legacy of debt. "I have nine grandchildren," Peterson says. "I think a lot about them." Alan K. Simpson is 79. The former Republican senator from Wyoming, who is co-chairman of President Obama's bipartisan National Commission on Fiscal Responsibility and Reform, told Bloomberg Television's Charlie Rose on Nov. 16 that he was too old to play budgetary politics anymore. "We're not going to sign our names at this stage of life to a bunch of pap," Simpson says he told his co-chairman, Democrat Erskine Bowles, 65, the North Carolina businessman who served as White House Chief of Staff for Bill Clinton. Says Simpson: "We call it the cruelty of making promises you can't keep."

Simpson and Bowles issued the first deficit-reduction proposal on Nov. 10, one week before former White House budget director Alice M. Rivlin, a 79-year-old Democrat, and Pete V. Domenici, 78, the former Republican senator from New Mexico, unveiled the recommendations of the Bipartisan Policy Center commission that they co-chair. With old-timey affection, she calls him "Senator Pete"; he calls her "Doctor Alice." But their admonitions are grim. Letting deficits continue to run out of control, they warn, would "make us increasingly vulnerable to the dictates of our creditors, including nations whose interests may differ from ours."