Fix recession first, then tackle the deficit

Just how worrisome our national debt has become was readily evident when Secretary of State Hillary Clinton publicly thanked the Chinese for buying so much of it.

The national debt is the cumulative total of the federal government’s annual budget deficits, which got out of control during the Bush administration and are now, it is generally agreed, at unsustainable levels. They erode our economic power internationally and cede a certain amount of control over our economy to outsiders.

President Obama, vowing to get the red ink under control, convened a deficit summit in Washington in advance of his submitting a summary of his planned 2010 budget to Congress on Thursday. The full budget, a stack of volumes the size of telephone books, won’t be out until April.

The Bush administration bequeathed Obama a 2009 deficit of $1.2 trillion and that should rise, with the full impact of the president’s stimulus package, to more than $1.5 trillion — some believe it will be as high as $2 trillion –in his first full year of economic stewardship. His forecasters aim to reduce the deficit to $533 billion by 2013, still huge by historical terms, and hold it to about 3 percent of GDP through 2019.

It will be a difficult feat to pull off. Obama made it harder for himself to pull off the appearance of deficit reduction by disavowing budget tricks Bush used to mask the size of his deficits: Keeping the cost of the wars off the books, and calling for spending cuts and tax increases — in Medicare reimbursements and the Alternative Minimum Tax, respectively — that Congress wasn’t going to pass.

Addressing the deficit requires some combination of spending cuts and tax increases. Obama proposes to raise the tax rate on incomes over $250,000 from 35 percent to 39.6 percent, in effect repealing part of the Bush tax cuts, and taxing investment income from private equity and hedge funds as ordinary income rather than at the current capital gains rate of 15 percent. He is also counting on huge revenues from a cap-and-trade program for greenhouse gas emissions.

He is counting on savings of $90 billion a year by withdrawing combat troops from Iraq, an undertaking that may not be as quick and cost saving as he plans.

With all that, he is still planning to extend health care coverage to 46 million uninsured, potentially a huge and costly new entitlement. And that will bring Obama to the intractable fact that he can’t have a serious, long-term deficit reduction plans without addressing the costs of Social Security, and that of the two health programs Medicare and Medicaid, which now cost $561 billion a year.

It is unlikely any serious deficit reduction will take place — or should take place — in the midst of a recession but by outlining his plans now Obama is lessening the shock when they actually come.