By PAUL WISEMAN
WASHINGTON (AP) â¿¿ An ax is scheduled to hit the federal budget Friday: Unless the White House and Congress reach a budget deal by then, automatic cuts will carve $85 billion out of the budget through Sept. 30 and $1.2 trillion over the next decade.
The cuts in defense spending, unemployment benefits and other programs could slow an already struggling economy. And they would leave unaddressed the biggest long-term threats to the government's finances â¿¿ rising bills for Medicare and Social Security.
Economists say there's a better way. Shrinking the federal debt doesn't have to mean either hurting the economy now or ignoring the spending burdens of the future.Economists widely agree that policymakers should delay deep cuts such as the ones slated to take effect Friday until the economy has strengthened. But they say lawmakers should come up with a realistic long-term plan to fix the debt as soon as possible. The plan would raise revenue and promote economic efficiency by closing tax loopholes, and it would focus cuts on the health care spending that will rise relentlessly as the vast baby boom generation retires. In the short term, though, what most worries economists is the threat of deep cuts this year. The cutting set to start Friday is "haphazard, and cuts good programs and bad. It's not good budgeting practice," says Mark Zandi, chief economist at Moody's Analytics. When a government spends more than it collects in taxes in a year, it runs an annual deficit. Every annual deficit adds to the accumulated federal debt. For the United States, both numbers look bad. Annual deficits have exceeded $1 trillion the past four years. The federal debt has reached $11.7 trillion, not including money that federal agencies have borrowed from each other, including from the Social Security trust fund. If nothing is done about the long-term budgetary burdens, the debt will reach $19.9 trillion by 2023, according to the Congressional Budget Office.