The Debt Dilemma

Each party has a different view of the national mood. The budget battle hinges on which has it right

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Illustration by Alex Nabaum for TIME

Leaders of democracies, like bear wranglers at the circus, must be experts at reading moods. Most of the time, the leaders of our two major parties seem to have much the same sense of the voters' basic concerns. But for the past two years, the parties have been operating under very different understandings of the public temper.

Democrats believed that the economic crisis made the electorate yearn for security, thereby creating an openness to large public programs. They enacted a gargantuan stimulus bill, expensive health care reform and other expansions of government. Republicans believed that the crisis alarmed voters about runaway government and debt, thus leaving them open to paring back the state. They ran on stopping and reversing the spending binge.

The 2010 elections suggested the Republicans were closer to the mark. But the Democrats continue to bet that voters were only venting and will reject actual cuts to popular programs. And so in the great budget battle raging in Washington, we still see two very different assessments of the public on display.

On its face, the debate is about how to address the government's enormous deficits and debt while growing the economy. The problem's scale is daunting. At more than $10 trillion, our debt has doubled in the past five years and will double again by decade's end. By the early 2030s, it will be roughly twice the size of our entire economy (far larger than the largest national debt in our history, right after World War II) and still growing out of control, gravely threatening future growth and prosperity.

The biggest reason for this long-term debt explosion is our system of entitlements. Republicans and Democrats in Washington both understand that reforming those entitlements (especially Medicare) is essential to making a real dent in the debt. But both also know that entitlement reform has always been deeply unpopular with voters.

That is where the parties' readings of the public mood become crucial. Because they believe that voters are just as opposed to entitlement reform as ever, President Obama and the Democrats have basically declined to offer any solutions to the nation's fiscal crisis. In his State of the Union address, the President said it was important to confront the problem of entitlement spending but did not propose to actually do so. The 2012 budget he released in February offered no reforms either and would accelerate the growth of debt.

Republicans, on the other hand, believe this is a fundamentally new moment in our politics and that political calculations need not lead to irresponsible policy. They have therefore committed to offering entitlement reforms in their 2012 budget, due out in early April. It seems that although they will be vague about Social Security, they will propose concrete reforms to Medicare. They are likely to leave untouched the benefits of Americans now over age 55. But for those who are younger, Medicare would be transformed into a system of vouchers that recipients would use to buy approved insurance of their choice.

The vouchers would provide about the same level of coverage as seniors currently get (with a little more for the poor and less for the wealthiest) but would grow more slowly than Medicare costs have and induce efficiency by making consumers more cost-conscious. Over time, such reform would yield enormous savings. But will voters be open to it?

Recent polls suggest that both the President and House Republicans run great risks with their strategies. Voters want real action to restrain spending and borrowing, but they have not come to terms with the fact that only entitlement reforms could make any real difference. They are therefore likely to judge Obama's inaction as inadequate and the Republicans' proposals as excessive. The question is which would bother them more.

Republicans have one advantage, though: the fact that their proposal would leave all today's retirees and near retirees untouched could dramatically alter the entitlement debate. In the past, Democrats have opposed entitlement reform to great political advantage, mobilizing seniors in defense of their benefits. But this time, Republicans will be making an unusual offer to older voters: "We will leave your benefits as they are and rescue your grandchildren from debt and decline."

Republicans hope that this novel appeal will neutralize some of the strongest opposition to reform of our entitlement system, allowing them to accomplish what was once politically unthinkable and markedly improve the nation's fiscal outlook. Their political future and the next presidential election may well hinge on whether they have read the mood of the country correctly.

Levin is the editor of National Affairs magazine.