Progressives, help fix the debt

By Ed Rendell

There is nothing progressive about red ink.

This year, progressives will campaign on strengthening the economic recovery, reducing inequality, improving college affordability, promoting broad-based wage growth, and making sure the most vulnerable among us are well cared for. And if we want all these to happen, we also need to campaign on fixing the national debt - not as budget scolds - but as the wing of the party that explains how growing debt is incompatible with the American dream.

The national debt is currently higher than it has been at any time since World War II and is on pace to continue growing faster than the economy. Yet, when confronted with this reality, many in my party deny that this is a problem and point to the declining deficit. They ignore the Congressional Budget Office's projections that the deficit will begin to rise again and the fact that the short-term deficit and long-term debt are not interrelated. They also associate any discussion of the debt with calls for gutting welfare programs, slashing entitlements, and imposing needless austerity.

As progressives, we should fight against these alleged solutions, but that does not give us the right to ignore the problem.

A growing national debt can have real and profound effects on the lives of ordinary Americans. High debt levels can hobble economic growth by stifling job-generating investments and slowing wage growth. Meanwhile, debt can increase the cost of living on working families by driving up the interest rates on everything from mortgages to student loans to credit-card debt. High debt levels can reduce the availability of affordable loans for first homes or small businesses.

The precise impact of higher debt levels is somewhat uncertain but far from abstract.

According to the Congressional Budget Office, wages two decades from now would be more than 10 percent lower if debt is on an upward path relative to the economy, compared with a downward path. In today's dollars, that's a $330,000-per-person wage cut for someone who works 40 years beginning today. Similarly, just a 0.3-point swing in the interest rate could lead a family with a $300,000 mortgage to pay an additional $20,000 in interest.

The very wealthy can bear these costs. But for ordinary Americans, that could be the difference between getting ahead and treading water or even falling further behind.

And if the direct impact of the debt weren't enough, it is increasingly impairing the government's ability to be a positive force in people's lives.

Each year, more and more of the federal budget is going toward interest payments, leaving less room for important investments in energy, education, infrastructure, low-income support, and basic research. Between 2013 and 2024, interest payments will quadruple from $220 billion to nearly $880 billion. And only a few years later, 100 percent of the revenue the government collects will go toward interest payments and mandatory spending instead of spending to promote economic opportunity and improve prosperity for the next generation.

Sensible reforms that close unneeded tax breaks and better target our health and retirement programs could make the room for these important public investments. Instead, our leaders have kicked the debt down the road through discretionary spending cuts and indiscriminate "sequestrations," which just make a bad situation worse and represent exactly the kind of austerity we need to avoid.

Progressives can protect and strengthen our most important programs only if we show the other side that we're willing to make room for these priorities in the budget.

As someone who has spent years focusing on policies to promote economic development and urban renewal across the income spectrum, I know firsthand how critically important these issues are to the well-being of families, communities, and the broader economy. The United States should not accept the situation where incomes for middle-class Americans have grown far slower than the overall economy in recent decades. Economic mobility has always been central to the American dream.

Creating economic opportunity for all will require Washington to enact a number of policy changes. But none of these changes will have a lasting effect if we don't have a plan to keep us from drowning in a sea of red ink.