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‘Grand bargain’ on deficit reduction: RIP?

President Obama's State of the Union address did nothing to address the nation's long-term fiscal imbalance, say deficit hawks. But Republicans share the blame. 

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Sometimes, a speech is significant not for the points it makes, but for the points it doesn’t make.

President Obama’s State of the Union address Tuesday – billed as the blueprint for his second term, not just the next year – appears to be one such case. Missing in action, policy analysts say, was anything new toward a “grand bargain” on federal deficits.

Mr. Obama applauded the $2.5 trillion in deficit reduction over 10 years already achieved, and pledged to reach his longstanding target of $4 trillion. That would be enough to stabilize the ratio of debt to the nation’s economic output for that period, but it does little to address the long-term imbalance that looms in Medicare, Medicaid, and Social Security, says former Clinton White House policy chief William Galston.

The annual budget deficit has sunk below $1 trillion for the first time in Obama’s tenure, the nonpartisan Congressional Budget Office (CBO) reported last week. But the good news is temporary. The deficit curve will bend upward before long. Already, the debt as a share of GDP is slated to clock in at 76 percent by the end of FY2013 – a historic high, per the CBO.

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