By all accounts, the nation is on an unsustainable fiscal course. Congress’s own budget and oversight agencies say this regularly. Yet members refuse to confront the main drivers of exploding deficits. There’s gotta be another way. To look into this, the Federal Drive with Tom Temin talked with Elaine Kamarck, a veteran of budget battles as a member of the Clinton administration. She is currently with Brookings, a senior fellow in Governance Studies and the founding director of the Center for Effective Public Management.

Interview transcript:

Tom Temin As you point out in your latest piece at Brookings, what they end up arguing about on the Hill is a fraction of the budget, because after interest on the debt, after the entitlement programs, which are ruled, quote unquote, nondiscretionary, there’s the defense budget and there’s the rest of the operating the government budget. One side won’t commit to cutting the opposite side and vice versa. And so they keep approving these big budgets. What can possibly break this jam and maybe get to some of the big issues?

Elaine Kamarck Well, you hit the nail on the head. There’s just no money to speak of in the non-defense discretionary side of the budget. And the problem with that, of course, is that even what is in the non-defense discretionary side is things that people think are important. And as I said in my piece, the air traffic controllers. People get pretty mad when they can’t take off on time or flights are canceled because there aren’t enough controllers to fly safely. So there’s a lot in that piece of the budget that’s hard to cut. Look, there are only two ways to do this. Let’s just talk about that. The first way is to decide that you’re not going to do this function at the federal level anymore, OK. Take an entire Department, take Housing and Urban Development, people have argued that HUD is essentially a local and regional issue, not a national issue. And OK, so maybe we shouldn’t have a housing policy at the national level. OK, If you say we’re not going to do this anymore and states will do it or cities will do it or regional entities will do it, OK, that’s one way to cut the federal budget. But to simply take money out so that what the federal government is left doing, they’re doing badly is pretty stupid. So that’s one way. The second way is the way we did it in the Clinton administration in reinventing government, which was very time consuming, very people heavy. Although, we didn’t hire people, we got people from the agencies to do it, who came over to work for us, is to actually look agency by agency. What are they doing? What could be automated? Where could layers of management be cut because you were going to use technology? etc. And we did cut the workforce. Bill Clinton (D-Ark.) Did have a balanced budget by the end of his term, second term. And that is another way to do it. But that is anathema to the Republicans. They hate government so much, they don’t want to learn about it.

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Tom Temin Well, on the other hand, you could say Democrats love it so much they can’t give up one fingernail shaving with it.

Elaine Kamarck That’s exactly right. I mean, both parties have real problems with this. Democrats think everything is sacrosanct. Republicans don’t want anything. And frankly, if you want to cut the budget, you have to really learn about the federal government. You have to really take a hard look at what they’re doing and how they’re doing it. It can be done, but it is really not easy.

Tom Temin The bigger question is the discretionary budget is roughly a little bit north of $1.5 trillion. Maybe it’s approaching 1.6 in the 2024 request. And if you could take a $100 billion out of it, $200 billion out of it, it would not make a dent really in the deficit, because there’s another four and a half trillion that nobody will touch. Well, you can’t touch the interest, the debt service, because then that would be defaulting on the debt. But then there is entitlement, which again, is a third rail. And I’m just looking at France, which realized that are unsustainable. And if we could only retire at 64, we’d be dancing in the streets and not rioting in the streets. But my question is, how do we get to that issue? And anything in your experience, lead to that discussion?

Elaine Kamarck That was one of the sad things about Bill Clinton’s second term getting tied up with the intern scandal. He had a solid victory in 96 and we had budget surpluses, we were looking at budget surpluses. It was the ideal time to do a transition in entitlement programs, in how they were funded and how they were paid out, etc. Because as you know, and as we know from around the world, whenever you move from one system to another, there are huge transition costs. We had the money, in the late nineties. We had the money to actually pay for transition costs. And yet, we did not have or Bill Clinton did not have the political capital to do anything like that. So we were stuck. And we missed that moment, we missed that moment in history. And so now, the other moment in history was, I think, 1983 when Reagan (R-Ill.) And Tip O’Neill (D-Mass.) Basically did an entitlement reform package. It was very quietly done. It was done for future generations, and yet, it bought us some important time, in terms of the soundness of the system. So those are sort of the two ways to do it. We’re not going to have surpluses any time soon. And unfortunately, we don’t have the kind of working relationship between a speaker of the House and a president of the United States that could do a grand deal, a grand bargain. And the interesting thing about that 1983 deal, I was much younger then and it affected me. But I had no idea really what was in it, and I was a political science graduate student, I had no idea. And because one of the ways to fix the system is you do it in the out years. You obviously have to make people who are in the system, you can’t mess with them. But you can, in fact, make very incremental changes. And what’s always struck me about Social Security, particularly, is how very small changes have gargantuan budget effects.

Tom Temin A lot of leverage there.

Elaine Kamarck Yeah, it really is a lot of leverage there. So, again, if you had a normal political system where you were able to negotiate, this is very doable. But we haven’t had that for a long time.

Tom Temin I thought George W. Bush (R-Conn.) Also missed an opportunity in the beginning of his second term, maybe changing the investment structure of Social Security so it would be more productive than simply being in Treasury bonds. But the way he presented it did not include the other party. It was kind of a surprise bomb drop, and therefore, went nowhere.

Elaine Kamarck The other thing that happened to Bush, remember, is that whatever political capital he got from winning in 2004, he lost with Hurricane Katrina. Katrina happened then in September of his first term. So he didn’t have nearly the political capital he needed to do this. And I will tell you, because, of course, I worked for Al Gore (D-DC) and we looked at this very, very closely. The bottom line to any privatization of Social Security, the bottom line is, as they say in Texas, that dog don’t hunt. It just doesn’t work. The reason it doesn’t work is that any drop in the market that would affect a generation of retirees, the political will and strength to have Congress step in and make them whole would be overwhelming. And so it’s kind of a dream.

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Tom Temin I guess the same could be said for means testing, too. I mean, there are billionaires on Social Security. And they’re entitled to it, because the law says so, and Medicare and so on.

Elaine Kamarck With the billionaires, there are very small adjustments that could be made that they wouldn’t even notice. So changes in the way you calculate cost of living for seniors with millions of dollars in assets. They wouldn’t notice, they’re not living on their Social Security. So I think there is more fertile ground than privatization.

Tom Temin So nothing can happen then in the short term, I guess it’s kind of the mystery then of what will make people want to cooperate with one another. And I don’t think either one of us knows the answer to that question.

Elaine Kamarck That’s right. This is one place where you really need both parties doing good faith negotiations. And it’s not as if there aren’t answers. There are plenty of answers, there’s plenty of ways to tackle this. But the political will in this day and age is just not there.

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