There is no question that major changes will have to be made to the U.S. budget in coming years. Surpluses are never expected to return, the debt is projected to climb to unprecedented levels, and major programs are significantly underfunded, leaving participants uncertain about what benefits they will receive in the future.

Though the largest changes should be implemented gradually so as not to derail the economic recovery, already we have seen many bills stall in Congress due to concerns about adding to the debt. (Though there seems to be a startling blind spot about the tremendous multi-trillion dollar cost of extending the Bush-era tax cuts). Calls for fiscal responsibility will only grow as our debt continues to mount.

At the same time, growing income inequality persists and poverty has been rising as the recession has taken a huge toll on wages and employment rates among lower-income Americans. The poverty rate increased to 13.2 percent of households in 2008, up from 12.5 percent in 2007, and is expected to have climbed even higher in 2009 and up to the present. In addition, the percentage of people close to the federal poverty line, known as the “near poor,” has also increased significantly since 2007.   

Changes to the budget are inevitable. We will have to reduce the U.S. debt burden if we want to pass along a vibrant economy to the next generation of Americans—one that can offer a job for anyone who seeks one, and an adequate safety net for those who cannot work. The sooner we begin, the easier it will be to protect the most vulnerable in society. Smaller changes will be needed initially if we get started as soon as the economy will permit, and there will be more time for those who are affected to prepare and adjust.

The risk is that if we fail to act on our own accord to fix the budget, and wait instead until market pressures force our hand, we will not be able to pick and choose to craft a smarter, leaner budget, and instead will put at great risk those who depend on government the most. Under a wait-until-there-is-a-crisis scenario, it is much more likely that everyone will have to share the burden of fiscal adjustment – even the most vulnerable – as savings would have to be identified immediately. Just look at Ireland and Greece, where sudden demands from markets and creditors  to realign spending and revenues paths have prompted protests and strikes over widespread government cuts. Protecting the most vulnerable in our society will be more difficult if our creditors suddenly demand cutbacks. 

Not only will acting sooner better insulate lower-income Americans, but focusing on pro-growth reforms could actually make the economy stronger relative to what would have occurred absent any changes. By streamlining our outdated tax system, shifting resources from consumption to investment, and reducing spending on unnecessary and wasteful programs, future economic growth could be substantially stronger.

But growth is not enough—the benefits of growth will have to be widespread, as growth alone does not automatically assist all segments of society. Policymakers will have to make sure that wage growth and job creation do not just happen for middle- and upper-income Americans, but for everyone. Since much of the American safety net is predicated on current or previous employment (for instance, the earned income tax credit and unemployment insurance), ensuring job creation at all income levels will play a large role for both fiscal reform and poverty reduction.  

Finally, changes that ask the most from those who are doing best are only fair in this economy. Progressive tax policies – which are different than irrational pledges not to raise any taxes on the bulk of the population – make sense given the wide disparity in income growth. A progressive consumption tax, for instance, would be both good for the economy and fair in terms of distribution. The estate tax should certainly remain—why should a minimum wage worker pay a greater share of his or her paycheck in taxes than someone who inherits his or her money?

On the spending side, given the choice between across-the-board or targeted benefit cuts in entitlement programs, it only makes sense to reduce benefits for those who need them least and protect those who depend on programs like Social Security. In fact, we should strengthen these programs for the least well-off. We should turn social insurance programs into real insurance programs that truly offer protections when needed and better direct the limited resources to the highest needs.

Low poverty levels are vital to sustained fiscal health. Spending on Medicaid, unemployment insurance, food stamps, and other programs aimed at assisting lower-income Americans constitute a large and growing portion of the federal budget. Any serious plan to control future deficits must understand this and ensure the most vulnerable in society are protected to the greatest extent possible.

Some critics contend that fiscal reform and poverty concerns are mutually exclusive goals, as higher taxes or lower government spending would invariably affect lower-income Americans, either directly or indirectly. But these critics ignore the fact that by spreading the burden of adjustment over more people and over a longer period of time, we can avoid a fiscal crisis while actually strengthening the economy. They ignore the fact that if we do not act in the near future, a fiscal crisis in some form or another will surely make creditors force changes upon us. We must remember that it is always better to make fiscal changes on our own terms.