This is another in occasional posts regarding the ongoing national debate about the federal debt and deficit. I’ve already written about the incredible ignorance shown in polls asking the public about the growing problems. By large margins, Americans see the deficit and debt as serious problems, but by large margins Americans don’t want to take any of the practical steps (with the exception of higher taxes on very high earners) that would address the problems.
It’s good to see some serious people really taking off the gloves, and I don’t mean Congressman Paul Ryan and his supporters. (The Ryan plan relies on economic assumptions that are nothing short of preposterous; I’ll write more about that soon.)
No, I’m talking about someone like David Stockman, whose op-ed “The Bipartisan March to Fiscal Madness” appears in today’s NYT. The former director of the Office of Management and Budget during Reagan’s first term attacks the arguments so far laid out from both ends of the political spectrum:
Washington’s feckless drift into class war is based on the illusion that we have endless time to put our fiscal house in order. This has instilled a terrible budgetary habit whereby politicians continuously duck concrete but politically painful near-term savings in favor of gimmicks like freezes, caps and block grants that push purely paper cuts into the distant, foggy future. Mr. Ryan’s plan gets to a balanced budget in the fiscal afterlife (i.e., the 2030s); the White House’s tactic of accumulating small-fry deficit cuts over the enormous span of 12 years amounts to the same dodge.
On the President’s emphasis on avoiding pain for the middle class and below, Stockman says in part:
In attacking the Bush tax cuts for the top 2 percent of taxpayers, the president is only incidentally addressing the deficit. The larger purpose is to assure the vast bulk of Americans left behind that they will be spared higher taxes — even though entitlements make a tax increase unavoidable. Mr. Obama is thus playing the class-war card more aggressively than any Democrat since Franklin D. Roosevelt — surpassing Harry S. Truman or John F. Kennedy when they attacked big business or Lyndon B. Johnson or Jimmy Carter when they posed as champions of the little guy.
Of the supply-side ideas behind the Ryan plan, Stockman rages:
On the other side, Representative Ryan fails to recognize that we are not in an era of old-time enterprise capitalism in which the gospel of low tax rates and incentives to create wealth might have had relevance. A quasi-bankrupt nation saddled with rampant casino capitalism on Wall Street and a disemboweled, offshored economy on Main Street requires practical and equitable ways to pay its bills.
Ingratiating himself with the neo-cons, Mr. Ryan has put the $700 billion defense and security budget off limits; and caving to pusillanimous Republican politicians, he also exempts $17 trillion of Social Security and Medicare spending over the next decade. What is left, then, is $7 trillion in baseline spending for Medicaid and the social safety net — to which Mr. Ryan applies a meat cleaver, reducing outlays by $1.5 trillion, or 20 percent.
Trapped between the religion of low taxes and the reality of huge deficits, the Ryan plan appears to be an attack on the poor in order to coddle the rich. To the Democrats’ invitation to class war, the Republicans have seemingly sent an R.S.V.P.
Stockman believes that sovereign debt poses horrible risk, and ends his piece apocalyptically:
By 2014, for example, the Ryan plan does not save a dime from the $2.2 trillion baseline for Social Security, Medicare and national security spending. Then it extends all the Bush tax cuts at a cost of $350 billion while instructing the states to reduce spending for the poor by $100 billion and the Congress to slice domestic discretionary spending by 25 percent. That toxic brew is likely to find few takers — even at a Mad Hatter’s tea party.
The latest iteration of the Obama plan is little better. By 2014, it would generate $70 billion from taxing the rich and perhaps $30 billion from the president’s belated call to re-examine our over-financed military but virtually nothing from freezes on domestic programs or from Medicare reimbursement reforms.
So the Ryan plan worsens our trillion-dollar structural deficit and the Obama plan amounts to small potatoes, at best. Worse, we are about to descend into class war because the Obama plan picks on the rich when it should be pushing tax increases for all, while the Ryan plan attacks the poor when it should be addressing middle-class entitlements and defense.
In the real world, however, the global bond market is already rumbling — and around the corner, a fiscal conflagration surely lies.
For another take on the bipartisan failures, check out Robert Samuelson’s Washing Post column from last week, “What’s missing from the Great Budget Debate: seriousness”.
Samuelson says in part:
In the Great Budget Debate, Democrats and Republicans are closer than you might think. Neither is proposing a balanced budget anytime soon; both peddle soothing myths to convince supporters that they’re upholding either “liberal” or “conservative” values. Meanwhile, the public seems largely clueless about the enormity of the problem.
Like many other commentators, Samuelson sees the only way to balance the budget as being a combination of cuts to entitlements AND an increase in taxes:
We won’t make much progress until (a) Democrats concede that spending control requires genuine cuts in Social Security and Medicare, which now total $1.3 trillion annually and represent 35 percent of federal outlays; and (b) Republicans acknowledge that, even after significant spending cuts, tax increases will be needed to balance the budget. Last week, there was little sign of either. President Obama rebuffed Social Security and Medicare cuts. Most Republicans held fast on taxes.
What we have instead is a public relations war. Both parties propound brands of wishful thinking designed to make it seem that they’re accomplishing more than they are.
Samuelson is not as dire in his warnings as Stockman, but he takes the time to dice apart the Ryan plan’s assumptions and the President’s lack of candor. He concludes:
We still await a serious debate about which programs to cut and which taxes to raise. Congressional Republicans advance a radical plan for shrinking government — and are not candid about it. Obama defends the status quo of ever-bigger government — and is not candid about it. Perhaps these are negotiating positions and, needing to raise the federal debt ceiling, both sides will recognize their shortcomings. It’s a hope.
The only hopeful thing that I’m seeing in this debate right now is that people like Samuelson and Stockman are using media platforms to look at hard numbers and try to educate the public about our choices.