Special Report

America’s Reality Check

Fiscal commission proposals offer Americans a chance to decide what type of future they want.

By 12.3.10

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One of the drawbacks to the concept of "American exceptionalism" is that it has instilled a belief that the nation can have everything in perpetuity -- the best military in the world, a vibrant economy, low taxes and a growing welfare state -- just because we're Americans.

For decades, with times relatively good, this belief allowed the nation to ignore those who warned about the threat posed by the tremendous growth of the federal government. Yet when the financial collapse hit in 2008, it ushered in an era of annual trillion-dollar deficits, giving Americans just a small taste of what the future holds.

The conflict over the size of government is not merely a numbers game, but a generational issue. If federal spending grows at its current trajectory, America will become a nation of stagnant growth, high unemployment, crushing tax rates, and runaway inflation. Its military strength will deteriorate substantially, making the nation more vulnerable. And younger generations of Americans will experience a substantially worse standard of living than their elders.

Over the past several weeks, Washington has been flooded with deficit reduction proposals sprouting from President Obama's fiscal commission. While none of these various plans are likely to be adopted in the near future, they do help highlight the stark contrast in visions for how to respond to the nation's financial challenges.

On one end of the spectrum is a proposal advanced by the most liberal member of the deficit panel, Illinois Rep. Jan Schakowsky. Her plan calls for drastically cutting the military budget while raising income taxes, estate taxes, corporate taxes, payroll taxes, and capital gains taxes. She would implement "cap and trade," add the government-run plan, or "public option" to ObamaCare, and have the federal government "negotiate" drug prices. In addition, she would spend $200 billion on more stimulus projects. In sum, her plan would put America on an accelerated course toward a European-style welfare state.

On the other end is Rep. Paul Ryan, who has already presented his "Roadmap for America’s Future." While conceding that entitlement programs would have to remain intact for those at or nearing retirement, his plan would reform them for younger workers by emphasizing individual choice. Alice Rivlin, a member of the commission and a former director of the White House Office of Management and Budget under President Clinton, signed on to Ryan's proposal to transition Medicare into a voucher program and turn Medicaid into a block grant to states to allow governors more flexibility. Ryan's plan would overhaul the tax code without raising taxes, and does not involve cuts to the military budget.

Today, the 18-member commission will vote on the final report of its directors, former GOP Sen. Alan Simpson and one time Clinton chief of staff Erskine Bowles. The plan includes steep military cuts that would bring the defense budget as a share of the economy roughly to where it was before the Sept. 11 attacks. It would simplify the tax code by getting rid of many popular deductions while lowering marginal tax rates. Yet overall, it would still end up raising taxes by $1 trillion, according to estimates by Americans for Tax Reform, and move revenue as a share of the economy from its historical 18 percent to an alarming 21 percent. In addition, it would make changes to Social Security, including raising the retirement age by two years over the next 65 years.

While it has gained some bipartisan support -- including from Democratic Sen. Dick Durbin and Republican Sens. Mike Crapo, Judd Gregg, and conservative stalwart Tom Coburn, the Simpson-Bowles plan is unlikely to be enacted any time soon.

That said, these proposals mark a good opportunity for Americans to question what type of country they want to live in, because the status quo is unsustainable. Do they want to maintain global military supremacy, or are they comfortable adopting a non-interventionist foreign policy and curtailing our military commitments? Do they want to keep taxes relatively low, or are they willing to accept much higher tax rates in exchange for government services? Do they want to be a nation of free markets and individual responsibility, or are they comfortable evolving into a European-style welfare state?

It's crucial that Americans answer these questions now, because the longer lawmakers delay action, the more difficult it will be to manage the looming crisis. However inspiring the story of its founding, whatever its great achievements, no matter how strong its character has proven to be in the past, America is not immune to reality.

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About the Author

Philip Klein is The American Spectator's Washington correspondent. You can follow him on Twitter at: http://twitter.com/Philipaklein