A good rule of thumb: Whenever leaders of both parties hail
legislation that passed with bipartisan majorities as “historic,”
hold on to your wallet. That seems to be the case for the historic
spending deal Congress passed last week to avoid a government
shutdown.
Although everyone from President Barack Obama to House Speaker
John Boehner praised the deal for including the biggest single-year
spending cut in history, the Congressional Budget Office now says
its impact on the current fiscal year’s budget deficit would be too
small to pay for a single week of bombing in Libya.
In a way, it is fitting that this was the closest the two
parties could come to fiscal responsibility. While many things have
contributed to our country’s deepening fiscal crisis, there is an
informal bipartisan agreement that has been a major driver: ever
since Ronald Reagan whipped stagflation, the country has
essentially been paying for Democratic spending programs with
Republican tax rates. Economic necessity has prevented
Democrats from raising marginal tax rates back to their pre-Reagan
heights. Politically necessity has kept either party from doing
more than nibbling around the edges of the Great Society, even when
struggling to bring deficits under control. David Frum once called
this neat little trick post-Great Society government at pre-Great
Society prices.
Demographic changes like the aging of our population plus the
diminishing returns on post-Reagan tax cuts — slashing the top
income tax rate from 39.6 percent to 35 percent just does not give
the same bang for Laffer Curve buck — made this bargain untenable.
Fiscal conditions have particularly deteriorated due to the
profligacy of the past two administrations.
George W. Bush simultaneously splurged on guns and butter in a
feast not seen since Lyndon Johnson was in the White House. He
launched two wars, created a new entitlement program, and presided
over a vast increase in non-defense discretionary spending, all
completely unfunded. While regularly tut-tutting the mess his
predecessor has left him, Obama followed up with a spending binge
that made Bush look like Calvin Coolidge by comparison.
Yet last week may have marked the end of this bipartisan shell
game. While the fiscal 2012 spending blueprint introduced by House
Budget Committee Chairman Paul Ryan is not without faults, it is
perhaps the most honest long-term budget endorsed by a major party
in years. It tells the truth that we cannot pay for the promises
the federal government has made while keeping the tax burden at is
historic levels. So the Ryan budget seeks to maintain that tax
burden, roughly 20 percent of GDP, while paring down spending
commitments to a level that tax take can pay for.
Democrats, by contrast, want to maintain the benefit levels
promised by current law. But they are not honest about what it will
take to pay for them. When the president unveiled his new deficit
reduction plan, complete with 12-year budget windows, he pretended
those benefits could be paid for simply by increasing the tax
burden on upper-income taxpayers.
Unfortunately for the president, only about $800 billion can be
recouped by returning to the Clinton tax rates on those earning
more than $250,000 a year. And that’s assuming the static revenue
estimates prove accurate. The rest would have to be raised by
increasing taxes on the middle class — and that’s something the
president and most Democrats in Congress have repeatedly said they
will not do. Obama has said he would like to cut taxes for his
non-rich 98 percent. Many Democrats are in favor of making the Bush
tax cuts for the middle class permanent.
Of course, there are Democrats willing to go further than the
president. The House Progressive Caucus introduced an alternative
budget that slashed military spending and contained tax increases
more ambitious than anything Obama will endorse ahead of next
year’s election. Their plan got exactly 77 votes. To put this in
perspective, more Democrats in Congress voted “present” on the
Republican Study Committee budget — that is, a proposal to the
right of Ryan’s budget — than were willing to support the
Progressive Caucus’ handiwork.
Republicans are at least willing to try to shrink the federal
government to a size their tax rates will pay for. Democrats are
still insisting that their promised government benefits can be
financed with Republican tax rates for everyone but the top two
percent. The math just ain’t on their side.
The Democrats nevertheless hope that the politics may
be. They are already in full campaign mode against the
Republicans’ proposed reforms of Medicare and Medicaid. Instead of
any tough medicine, they are promising to pay for the post-Great
Society welfare state by raising taxes on somebody else.
Last week may have marked the end of bipartisan entitlement
trickery. But old political habits die hard.
