Rooting for a Fiscal Catastrophe


By Joe Campbell
December 30th, 2009


 
The Wall Street Journal editorial board is following the exact playbook I predicted/described Republicans would take in dealing with the coming fiscal crisis.

During those times it had power since 1980, the Republican Party has blown out the deficit while in office by increasing spending for their constituencies (the elderly, big corporations, and the military) while cutting taxes for the wealthy a lot and a bit for everyone else. When out of office, the Republican Party has agitated for “fiscal responsibility” by which it apparently means protecting the status quo of spending while cutting taxes even more (and until the aughts, it also included reducing spending on groups that weren’t part of the Republican base.) This strategy was christened “starve the beast” – and it theoretically will culminate in the moment when government spending is so far above government revenue that no increase in taxes could make up for the difference. Thus a generation in the future (probably mine) will need to suffer through increased taxes with minimal government assistance, discrediting the idea of effective government itself.

Bill Clinton responded when he was handed this mess by fixing the fiscal situation he was handed: shelving his proposed spending, reforming welfare, cutting the budget, and keeping taxes as they were. (In fairness, George H. W. Bush also helped fix Reagan’s fiscal irresponsibility.) Obama proposes something different – to keep the economy growing, to “bend the curve” of health care spending, and with some of the fiscal pressure relieved, then to come to some “grand bargain” which will shore up our fiscal situation.

Looking at the politics of the moment, I predicted that the Republican Party (of which the WSJ editorial board is a primary voice) would want no part of any solutions. They would respond to this challenge from Obama by passing off all the responsibility for the increases in taxes or cuts in spending onto the Democrats (despite the facts shown in the graph below) – and would strive to protect the status quo by defending the privileged position their constituencies have – all the while asserting that fiscal disaster is looming.

This is how the Wall Street Journal framed the issue:

Democrats are candid, at least in private, about the kind of the deal they have mind this time around. Democrats would agree to means-test entitlements, which means that middle and upper-middle class (i.e., GOP) voters would get less than they were promised…

In return, Republicans would agree to an increase in the top income tax rate to as high as 49% and in addition to a new energy tax, a stock transaction tax, or value-added tax. The Indians got a better deal for selling Manhattan.

New taxes will only reduce the pressure to cut future spending…

The Democrats will use a tax-and-spend commission to confront Republicans with the false choice between huge tax increases or fiscal disaster. Republicans should respond with their own choice: They’ll agree to a deficit commission only if it takes tax increases off the table and forces all of Washington to confront the hard spending trade-offs between guns and butter, old and young, the poor and middle class, and social welfare and corporate welfare. Otherwise, Democrats should be forced to defend and finance their own destructive fiscal choices. [my emphasis]

To rephrase what the Journal is saying, “We oppose any changes to the status quo that would hurt anyone who benefits now. Therefore, we want no part of any solutions to the coming fiscal crisis. But it’s the Democrats fault!” For the Journal, fiscal responsibility is cutting spending. Yet they oppose cutting spending on “middle and upper-middle class (i.e., GOP) voters.” And they also have previously opposed cutting spending on the elderly and the military.

For the Republicans, responsible governance – where spending and revenue are matched – is irresponsible.

Given this ideological position, it’s not surprising that what the WSJ is signaling that they wouldn’t mind spending cuts as long as the Democrats take responsibility for them and those who benefit from the status quo don’t have to give up their privileged position. The Republicans are determined to keep the status quo intact until it becomes unsustainable – and in the aftermath of that fiscal catastrophe, remake the nation by cutting back the role of government. In contrast, the Democrats are committed to making the status quo into a sustainable system, while aiding those who are least privileged.

That’s not even getting to the inaccuracies in the framing of the piece (i.e., the lies at the heart of it.) Ezra Klein posted an excellent graph in response to this op-ed pointing out that the “destructive fiscal choices” the WSJ is attributing to the Democrats can be entirely placed on the Republicans.

Beyond the ten year time window in the graph, the entitlement spending budget explodes because of rapidly growing medical costs and an aging population – but that is exactly the rationale for health care reform that “bends the curve” that Democrats have been pushing and the Journal and Republican Party have opposed.

[Image by kevindooley licensed under Creative Commons.]

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