Deficits are not as pressing a problem as economic recovery. A stronger recovery must not only come first, but is the best way to begin to heal the budget. Fighting to uphold health care reform is also crucial, because, in the long run, that is key to taming the deficit.
Further, near-term stimulus must be paired with a credible plan to reduce deficits as the economy recovers — including tax reform that raises revenue through various changes, like a simplified income tax, a new value added tax and a financial transactions tax. Even though he agreed to extend the Bush tax cuts through 2012, Mr. Obama must educate the public on their ruinous effects: They account for roughly 40 percent of today’s deficit, a share that will grow over time.
When deficit reduction begins in earnest, tax increases and cuts in big-ticket programs — Medicare, Medicaid, Social Security and defense — will be the focus. Before that, Mr. Obama must not be drawn into nickel-and-dime cuts that will not solve the deficit problem — and will impede recovery.