If Social Security reform is political dynamite, the battle over whether to raise the retirement age may be the fuse. I got a hint of the passion behind this issue at an Urban Institute panel I moderated yesterday on Capitol Hill. In recent weeks, both Steny Hoyer (D-MD), who is the number #2 House Democrat, and John Boehner (R-OH), the top House Republican, have put the idea on the table. Ah, you say, there is finally bipartisan support for something in Washington. Not so fast. Both are far out on a legislative limb with little public support from fellow lawmakers.

I came of age as a Royals fan, and I agree with George Brett’s comments at his Hall of Fame induction ceremony, “I don’t like those Yankees still”. George Steinbrenner’s Yankees tortured my beloved Royals in the late 1970s and early 1980s. I’ll never forget my dad flipping across news channels so my family could watch Brett tear out of the dugout over and over after umpires nullified his home run because Steinbrenner’s Yankees objected to the amount of pine tar on his bat. Ridiculous.

The conventional wisdom is that Americans are fed up with their government. But our demands on policymakers are so inconsistent and irrational that we make governing nearly impossible. We hate big deficits, but oppose the actual tax increases or spending cuts that we need to dam the flood of the red ink. We are furious that government passed an $800 billion stimulus last year, but feel lawmakers are not doing enough to get the economy going. We want government to “do something” about the gulf oil spill but reject government interference in private business.

Back in 2005, Congress gave many high-income savers a great gift, with the proviso that they couldn’t unwrap the package until this year. The bequest allowed the affluent to convert their traditional tax-deferred Individual Retirement Accounts into tax-free Roth IRAs. Now that these lucky investors have torn open the box, we’re beginning to learn what this opportunity will mean both for them and for federal revenues.

It’s hard to imagine that spending restraint alone can solve America’s long-run fiscal woes. Facing an aging population and rising health care costs, the federal government will continue to expand even if policymakers take serious steps to trim spending. That’s why policy wonks are working so hard to evaluate ways to raise more revenue. Cutting back on loopholes and other tax expenditures, taxing carbon emissions, introducing a value-added tax – all of these deserve attention in case America decides that it wants to finance a substantially larger federal government.

When the Senate returns next week, it must confront a bit of unfinished business—what to do about extending unemployment benefits. As fans of the ongoing soap opera that is the World’s Greatest Deliberative Body already know, the Senate failed to pass the unemployment bill before rushing out of town for its Fourth of July holiday. And just before the Labor Department issued a discouraging report that suggested private job creation may be slowing.

While the rest of us are celebrating Independence Day, most states are commemorating the beginning of their new fiscal years. Forty-six states started their budget year on July 1 and most have managed to pass their tax and spending plans on time. In many legislatures, fiscal plans were accompanied with more than the usual share of fireworks, though not the partying kind.

The Congressional Budget Office offers two visions of the future in its new long-run budget outlook. The first imagines a world in which lawmakers take pay-as-you-go budgeting really seriously. The budget baseline assumes that existing laws execute exactly as written: all the 2001 and 2003 tax cuts expire, the alternative minimum tax hits millions more families, real bracket creep drives taxes far above historical norms, Medicare payments to doctors are cut by more than 20%, discretionary spending grows only with inflation, and all the offsets in the recent health legislation – taxes on “Cadillac” health plans, cuts in provider payments, etc. – happen as scheduled. If Congress tries to avoid any of those changes, it would have to pay for them through offsetting spending cuts or tax increases.

On the day when the Congressional Budget Office projected that the federal debt could reach 185 percent of Gross Domestic Product by 2035, consider a bill introduced by two Arizona lawmakers, Senator John McCain and Representative Jeff Flake. Carrying on a nearly two-decades-old tradition, the two GOP legislators have introduced the “Debt Buy-Down Act,” which would let taxpayers designate up to 10 percent of their federal income tax liability for debt reduction. Congress would have to cut specific programs by the aggregate amount of designated taxes or accept an across-the-board spending reduction.

For the past decade, policymakers and pension experts have encouraged employers to increase worker participation in 401(k) plans by automatically enrolling their employees in these retirement programs. And it works. One study concludes that participation among new hires nearly doubles—from less than half to nearly 90 percent—when workers are auto-enrolled.