Last week, Sen. Manchin hosted the co-chairs of the federal deficit commission to discuss their draft proposal for deficit reduction. Sen. Manchin should be commended for bringing attention to our nation's finances and for hosting a lively discussion about the commission's proposal.
While there are admirable elements to the plan, it is unfortunate that deficit reduction has come to occupy center stage in the national political debate when clearly our country's biggest problem is the jobs deficit.
Nearly five years after the beginning of the recession, we still have more than 23 million people unemployed, underemployed or who have given up looking for work altogether. West Virginia would need an additional 27,000 jobs to reach its pre-recession level.
Deficit reduction in the near future will worsen the unemployment problem because it means pulling money out of the economy, either by increasing taxes, cutting government employment or cutting government payments like unemployment benefits and Social Security. Whichever way the government looks to reduce the deficit it will mean that there will be less spending, which in turn means employers see less demand and will want to hire fewer workers.
While people may want the private sector to fill the gap, employers don't hire workers until they see additional demand for their products, and this is not going to happen when the government is cutting the deficit.
Over the longer term, there is an argument that the government faces a deficit problem, but this is overwhelmingly a story of health care costs. We already pay more than twice as much per person for our health care than other wealthy countries and have little to show for it in terms of outcomes. If we paid the same amount per person as Canada or Germany, we would be looking at projections of huge budget surpluses rather than deficits.
This would seem to suggest the urgency of fixing our private health care system. Public sector programs like Medicare and Medicaid are actually more efficient than private insurers. The problem is that the private sector charges too much for care.
Unfortunately, Washington does not seem likely to go this route to deal with the deficit. The most widely cited plan for addressing the deficit is the proposal put forward by Morgan Stanley Director Erskine Bowles and former Sen. Alan Simpson, the co-chairs of President Obama's deficit commission.