Commentary Magazine


Topic: debt

The Budget Deficit

The good news is that the budget deficit of the federal government for fiscal 2013 fell by $309 billion, about 30 percent, to its lowest level in five years. It’s the first Obama deficit to be under a trillion dollars. But the bad news is that the deficit, $680.3 billion, is still 4.1 percent of GDP, well above what is considered a safe borrowing level by national governments for long-term fiscal health.

$680.3 billion is a lot of money. It is more than $2,100 for every man, woman, and child in the United States. It is greater than the total GDP of all but 20 countries. Taking inflation into account, it is about equal to the biggest budget deficit experienced in World War II (1943, when we were in the red to the tune of $54.7 billion). It is larger than the entire national debt as recently as 1976.

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The good news is that the budget deficit of the federal government for fiscal 2013 fell by $309 billion, about 30 percent, to its lowest level in five years. It’s the first Obama deficit to be under a trillion dollars. But the bad news is that the deficit, $680.3 billion, is still 4.1 percent of GDP, well above what is considered a safe borrowing level by national governments for long-term fiscal health.

$680.3 billion is a lot of money. It is more than $2,100 for every man, woman, and child in the United States. It is greater than the total GDP of all but 20 countries. Taking inflation into account, it is about equal to the biggest budget deficit experienced in World War II (1943, when we were in the red to the tune of $54.7 billion). It is larger than the entire national debt as recently as 1976.

Absent serious entitlement reform, the deficits are bound to increase in future years as more and more baby boomers retire and begin to receive Medicare and Social Security. The Congressional Budget Office estimates that entitlements will drive the deficits above 6.5 percent of GDP within 25 years, regardless of how well the American economy is performing.

The heart of the problem is that the national debt is a long-term problem and politicians are incentivized to think short-term. It is tomorrow’s headline and next year’s election that politicians care about. A crisis that is ten or twenty years down the road, even though it is clearly discernible now, is going to be someone else’s problem.

But every year that serious fiscal reform is put off, means the crisis, when it hits, will be that much more severe. The people who constitute the federal government today, Republicans and Democrats alike, are committing slow-motion treason by doing nothing now.

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Whose Fault Would Default Be?

President Obama is trying to establish the idea that any default on the national debt will be 100 percent the fault of the House Republicans. He has said, for instance, that Congress must “remove the threat of default and vote to raise the debt ceiling.” The treasury secretary, Jack Lew, said on Sunday that the administration would have “no option” to prevent a default.

But this is nonsense. The president is bound by his oath to uphold the Constitution and, as the distinguished–and liberal–historian Sean Wilentz points out in the New York Times today the 14th Amendment says that “the validity of the public debt of the United States, authorized by law” is sacrosanct and “shall not be questioned.” He
points out that the language was put in the 14th Amendment precisely to prevent Congress from welching on the enormous debt run up during the Civil War.

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President Obama is trying to establish the idea that any default on the national debt will be 100 percent the fault of the House Republicans. He has said, for instance, that Congress must “remove the threat of default and vote to raise the debt ceiling.” The treasury secretary, Jack Lew, said on Sunday that the administration would have “no option” to prevent a default.

But this is nonsense. The president is bound by his oath to uphold the Constitution and, as the distinguished–and liberal–historian Sean Wilentz points out in the New York Times today the 14th Amendment says that “the validity of the public debt of the United States, authorized by law” is sacrosanct and “shall not be questioned.” He
points out that the language was put in the 14th Amendment precisely to prevent Congress from welching on the enormous debt run up during the Civil War.

In an emergency, the president can certainly act to prevent a default, and thus uphold the constitutional mandate. Indeed, he would be violating his oath of office not to.

Default is nothing more than a failure to pay the interest and principal due on a debt in a timely manner. According to figures in a Power Line post, right now the government is spending about $17 billion every business day. It takes in about $14 billion in revenues. Thus it needs to borrow about $3 billion every business day to make up the difference.

A failure to raise the debt ceiling would prevent the government from borrowing that money. But it would not prevent the government from paying the interest on the debt, which amounts to only about 8 percent of revenues. Nor would it prevent the government from rolling over existing debt, which it does routinely.

What it would have to do is prioritize what bills it pays, leaving some unpaid. Families often have to do this to cover temporary cash shortfalls and there’s not a reason in the world the treasury can’t do the same. It would be embarrassing, to be sure, for the richest country on earth to have to stiff a few creditors for a while, but it would not be a default and would have few if any global financial consequences. States often do this, including Obama’s Illinois, which has debt problems that make the federal government’s look like a day at the beach.

So if this country defaults on its debt, it will be 100 percent the fault of President Obama. He has the power to prevent it. He needs only to exercise it.

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Detroit, Chicago, and Public Debt

When the city of Detroit finally imploded last month, liberal pundits and politicians told us that it was an anomaly. Rather than address an approach to governance in which overspending driven by liberal ideology and powerful municipal unions created an unsustainable equation, they urged us to put aside the notion that what happened there would be repeated elsewhere. They said the specific conditions that led to the Motor City’s bankruptcy were more a function of the decline of the auto industry and the peculiar dysfunction of local politics.

But while Detroit’s problems were undoubtedly exacerbated by those circumstances, the same math that sunk that city is at work throughout the country as similar municipal financial obligations are piling up in spite of the dwindling resources available to meet them. As today’s front-page story in the New York Times makes clear, even prosperous cities that have little in common with the devastated urban wasteland that Detroit has become may soon face the same dilemma. If a booming metropolis like Chicago is sinking under the weight of underfunded public worker pensions, how could we possibly expect Detroit or hundreds of other municipalities to survive?

The pension fund for retired Chicago teachers stands at risk of collapse. The city’s four funds for other retired city workers are short by $19.5 billion. At least one of the funds is in peril of running out of money in less than a decade. And starting in 2015, the city will be required by the state to make far larger contributions to the funds, which could leave it hundreds of millions of dollars in the red — as much as it would cost to pay 4,300 police officers to patrol the streets for a year.

It is true that Chicago’s fiscal woes are at present nowhere near the catastrophic level of those of Detroit. But what the Times (whose editorial page has been a consistent advocate of the “what me, worry?” liberal school of fiscal irresponsibility) rightly terms the “overwhelming pension liabilities” of cities like prosperous towns like Chicago, San Jose, and even a reviving Philadelphia are putting their futures at risk. The question is, are local politicians prepared to bite the bullet and face down their erstwhile union allies and deal with the source of the problem?

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When the city of Detroit finally imploded last month, liberal pundits and politicians told us that it was an anomaly. Rather than address an approach to governance in which overspending driven by liberal ideology and powerful municipal unions created an unsustainable equation, they urged us to put aside the notion that what happened there would be repeated elsewhere. They said the specific conditions that led to the Motor City’s bankruptcy were more a function of the decline of the auto industry and the peculiar dysfunction of local politics.

But while Detroit’s problems were undoubtedly exacerbated by those circumstances, the same math that sunk that city is at work throughout the country as similar municipal financial obligations are piling up in spite of the dwindling resources available to meet them. As today’s front-page story in the New York Times makes clear, even prosperous cities that have little in common with the devastated urban wasteland that Detroit has become may soon face the same dilemma. If a booming metropolis like Chicago is sinking under the weight of underfunded public worker pensions, how could we possibly expect Detroit or hundreds of other municipalities to survive?

The pension fund for retired Chicago teachers stands at risk of collapse. The city’s four funds for other retired city workers are short by $19.5 billion. At least one of the funds is in peril of running out of money in less than a decade. And starting in 2015, the city will be required by the state to make far larger contributions to the funds, which could leave it hundreds of millions of dollars in the red — as much as it would cost to pay 4,300 police officers to patrol the streets for a year.

It is true that Chicago’s fiscal woes are at present nowhere near the catastrophic level of those of Detroit. But what the Times (whose editorial page has been a consistent advocate of the “what me, worry?” liberal school of fiscal irresponsibility) rightly terms the “overwhelming pension liabilities” of cities like prosperous towns like Chicago, San Jose, and even a reviving Philadelphia are putting their futures at risk. The question is, are local politicians prepared to bite the bullet and face down their erstwhile union allies and deal with the source of the problem?

Some three years ago, Jeff Jacoby presciently wrote in COMMENTARY about the looming meltdown that threatened the nation. In his “What Public-Sector Unions Have Wrought,” Jacoby rightly pinned the problem on the unprecedented growth of government workers throughout the 20th century and their ability to force states, cities, and other local authorities to grant them generous benefits and pensions via collective bargaining negotiations in which the unions held all the cards. Their ability to blackmail governments via strikes that effectively shut down vital services combined with the political and financial clout they exercised to, in effect, elect their own bosses, the unions were able to rig the game “in favor of a privileged government elite and against the private taxpayers who pay its bills.” The result was the creation of a “multi-trillion dollar avalanche” of debt that no city, no matter how well off it might be, could possibly afford.

The only answer to this problem is to reform the collective bargaining process and to institute a series of changes that will end the guarantee of a lavish pension to current and future public workers. As Jacoby wrote:

Without depriving employees of any benefits they have earned to date, governments have to be able to amend the terms on which future benefits are earned. Tens of millions of Americans working in the private sector—including many belonging to labor unions—know from first-hand experience that the terms and conditions of future employment can be changed. That is how real life works, and a government job should not confer immunity from real life.

That still makes sense, but instead of confronting the reality of the meltdown, as Wisconsin Governor Scott Walker did with his controversial reforms that led to a union mob storming the state capitol in Madison and an ultimately unsuccessful attempt to force him from office, most states and cities are just looking for more ways to raise money from already overburdened average taxpayers who aren’t likely to be able to enjoy the same kind of benefits from their own jobs. To his credit, Chicago Mayor Rahm Emanuel has confronted this issue and enraged unions that think they should get their benefits even if no one can pay for them.

But what must be understood is that this drama isn’t limited to Detroit or Chicago. Liberals have spent the last century believing that paying for government spending is an insignificant detail. That has created a debt crisis that will soon have to be faced virtually everywhere in the country. It’s high time for liberals to face up to this fact and admit that the era of unfunded big government spending and public-sector union power must end now.

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Why Liberals Won’t Face Facts on Detroit

After the initial shock, liberals have responded to Detroit’s bankruptcy crisis with their usual vigor while attempting to answer conservatives who have rightly asserted that what happened to the Motor City was an inevitable result of liberal policies. What’s more, some, like Steven Ratner in the New York Times, are claiming that rather than forcing the city to face the consequences of misgovernment and reckless spending, the federal government should step in and bail the city out in much the same way it did with the auto industry. If, as I wrote last Friday, most Americans were under the impression last November that Barack Obama had already “saved Detroit” from the bankruptcy that he claimed Mitt Romney wanted to force upon it, the goal now should be to finish the job. But while that dubious proposal is at least rooted in a sense of obligation to the beleaguered retirees and workers of Detroit who are the chief victims of this debacle, Times columnist Paul Krugman is unafraid to confront conservative doomsayers head on and declare the whole thing an insignificant blip on the radar.

While Krugman is dismissed by many on the right as an ideological extremist, his point of view about the mess actually goes straight to the heart of not only the crisis in Detroit but the impending tragedy of debt that threatens every other American city and municipality. If liberals won’t face facts about Detroit, it is not because they aren’t paying attention so much as because they see the sea of debt that their policies have created as merely the natural order of things that must be accepted. As far as he is concerned, if some people are talking about Detroit being “the new Greece,” that ought to be a signal for Democrats to stop listening because he doesn’t even think the problems of that bankrupt European nation are worth worrying about. The “deficit scolds” that he now regularly flays from his perch at the Times and his sinecure at Princeton University are, he says, trying to sell the country on an austerity mindset that is not only wrong but unnecessary. But try as he might, the example of liberal governance that Detroit (and Greece) provides shows that the liberal social welfare project is a one-way path to insolvency with desperate consequences not only for taxpayers and bondholders but to the ordinary citizens that liberals purport to want to help.

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After the initial shock, liberals have responded to Detroit’s bankruptcy crisis with their usual vigor while attempting to answer conservatives who have rightly asserted that what happened to the Motor City was an inevitable result of liberal policies. What’s more, some, like Steven Ratner in the New York Times, are claiming that rather than forcing the city to face the consequences of misgovernment and reckless spending, the federal government should step in and bail the city out in much the same way it did with the auto industry. If, as I wrote last Friday, most Americans were under the impression last November that Barack Obama had already “saved Detroit” from the bankruptcy that he claimed Mitt Romney wanted to force upon it, the goal now should be to finish the job. But while that dubious proposal is at least rooted in a sense of obligation to the beleaguered retirees and workers of Detroit who are the chief victims of this debacle, Times columnist Paul Krugman is unafraid to confront conservative doomsayers head on and declare the whole thing an insignificant blip on the radar.

While Krugman is dismissed by many on the right as an ideological extremist, his point of view about the mess actually goes straight to the heart of not only the crisis in Detroit but the impending tragedy of debt that threatens every other American city and municipality. If liberals won’t face facts about Detroit, it is not because they aren’t paying attention so much as because they see the sea of debt that their policies have created as merely the natural order of things that must be accepted. As far as he is concerned, if some people are talking about Detroit being “the new Greece,” that ought to be a signal for Democrats to stop listening because he doesn’t even think the problems of that bankrupt European nation are worth worrying about. The “deficit scolds” that he now regularly flays from his perch at the Times and his sinecure at Princeton University are, he says, trying to sell the country on an austerity mindset that is not only wrong but unnecessary. But try as he might, the example of liberal governance that Detroit (and Greece) provides shows that the liberal social welfare project is a one-way path to insolvency with desperate consequences not only for taxpayers and bondholders but to the ordinary citizens that liberals purport to want to help.

Rather than confront the problem, Krugman merely says what happened in Detroit is “one of those things” that just happen in a market economy that always creates victims. He also claims that the underfunded pension obligations that threaten the future of virtually ever state, city, and municipal government in the country are no big deal. The trillion-dollar shortfall may strike Krugman as a mere detail, but Detroit may be just the first of many other large cities that will find themselves in similar predicaments. As Nicole Gelinas writes today in the New York Post, even New York, which unlike Detroit faced and overcame not altogether dissimilar problems involving debt and urban blight in the last generation, may eventually be put in the same position unless something is done to deal with a bill for retiree medical benefits that dwarfs that of Detroit. Though, as she points out, New York has a smaller bond debt, Detroit’s sea of red ink was created by a similar confidence that they could keep borrowing money indefinitely.

Krugman is right to say that there are always winners and losers in a free economy. Every city has its own story and Detroit’s is one that is particularly heavy on bad luck as well as mismanagement. But his Adam Smith-style warning that anyone could wind up being the buggy-whip manufacturer of the future ignores the factor that powerful unions and their political protectors play in exacerbating such problems. His claim that Detroit’s situation is the result of chance rather than primarily the result of “fiscal irresponsibility and/or greedy public employees” simply isn’t credible.

A bailout of Detroit sets a precedent that can’t be repeated elsewhere because there just isn’t enough money to pay for every city that will eventually face similar problems. The wake up call that Detroit is sending Americans is one Krugman and other liberals would like us to ignore because they are confident that the federal leviathan, controlled by Democrats and fed by liberal assumptions, will always be able to squeeze enough cash out of productive citizens to pay for the left’s follies. They won’t face the truth about this because to do so would require Americans to do some hard thinking about a society where virtually everyone has their snouts in the collective trough of big government and thereby is a stakeholder in its survival in its current form. But what Greece showed Europe and what Detroit tells Americans is that sooner or later the well of public funds will run dry if obligations to liberal constituent groups continue to grow unchecked. And when that happens it is exactly the little guys who are hurting in Detroit who will be forced to suffer for Krugman’s ideology.

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Low Student Loan Rates Not the Point

Republicans, candidates and the party alike, have a serious problem with young voters. The national party has conducted extensive research into how to solve the problem and it has already taken some promising steps in the right direction on several fronts, including digital strategy. The latest messaging meant for young donors coming from the RNC and Republicans in congressional leadership positions on student loan rates, however, is not only antithetical to the principles of conservatism, but will also prove ineffective in appealing to young voters.

Senate Republicans are justifiably frustrated at their Democratic colleagues’ inability to come to an agreement on student loan rates, which are poised to double on July 1 if a deal isn’t reached. Inexplicably, Senate Democrats have even rejected a proposal that President Obama set forth in his budget earlier this year.

Today the RNC gathered a small well-dressed group of young people that consisted of what their own official Twitter account described as interns, with handmade signs that appeared made with the same posterboard and markers, to protest the likely scenario of student loan rates doubling this summer. The protest may have been designed to appear organic, but the picture that emerged instead came across as quite staged. It seems Republicans believe that messaging on this Democratic failure will somehow endear them to young voters struggling under the weight of ballooning student debt.

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Republicans, candidates and the party alike, have a serious problem with young voters. The national party has conducted extensive research into how to solve the problem and it has already taken some promising steps in the right direction on several fronts, including digital strategy. The latest messaging meant for young donors coming from the RNC and Republicans in congressional leadership positions on student loan rates, however, is not only antithetical to the principles of conservatism, but will also prove ineffective in appealing to young voters.

Senate Republicans are justifiably frustrated at their Democratic colleagues’ inability to come to an agreement on student loan rates, which are poised to double on July 1 if a deal isn’t reached. Inexplicably, Senate Democrats have even rejected a proposal that President Obama set forth in his budget earlier this year.

Today the RNC gathered a small well-dressed group of young people that consisted of what their own official Twitter account described as interns, with handmade signs that appeared made with the same posterboard and markers, to protest the likely scenario of student loan rates doubling this summer. The protest may have been designed to appear organic, but the picture that emerged instead came across as quite staged. It seems Republicans believe that messaging on this Democratic failure will somehow endear them to young voters struggling under the weight of ballooning student debt.

Unfortunately for both the RNC and students, stopping a raise in rates wouldn’t solve the problem for the majority of students struggling not with the interest payments on their loans, but the principal. The ease with which students have taken out more loans than they can conceivably pay back after graduation is at the heart of the crisis. Making more money available at less cost would actually make the crisis worse for students and for an already bankrupt federal government, which has no business in the student loan business in the first place. Today the Wall Street Journal explained

The skyrocketing cost of a college education is a classic unintended consequence of government intervention. Colleges have responded to the availability of easy federal money by doing what subsidized industries generally do: Raising prices to capture the subsidy. Sold as a tool to help students cope with rising college costs, student loans have instead been a major contributor to the problem

In truth, America’s student loan problem won’t be solved by low interest rates—for many students, the debt would be crippling even if the interest rate were zero.

If we want to solve the very real problem of excessive student-loan debt, college costs need to be brought under control. A 2010 study by the Goldwater Institute identified “administrative bloat” as a leading reason for higher costs. The study found that many American universities now have more salaried administrators than teaching faculty.

The RNC’s populist message, which would do nothing to solve the student loan crisis, is unlikely to even register with most young voters. Few are even aware of the rates on their student loans, both when they take them out and when they graduate. The information isn’t even that easy to obtain: I spent over half an hour myself today figuring out the rates on each of my four federal loans to see how they compared to the rates currently being discussed.

The Republican Party has the right idea in trying to craft a message that appeals to young voters. What would not only resonate more, but also actually help them would be a plan to bring down costs, much like what Texas Governor Rick Perry has proposed with a $10,000 degree. Innovative solutions to bring down costs like Perry’s, not partisan demagoguery, is the future of the GOP’s outreach to younger voters. 

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The President, His Budget, and the Poor

There is much one could say about President Obama’s Rose Garden statement on Wednesday announcing his FY 2014 budget. On the plus side, the president endorsed a “chained CPI”–a measure of inflation that is a more accurate way to factor rises in the cost of living into Social Security benefits. It’s a good idea, if quite a modest one (this Wall Street Journal editorial explains why there is less to it than meets the eye). And of course if the president really believed in a chained CPI, he would be a strong advocate for it rather than viewing it as a concession to Republicans. (Jay Carney, in this interview with Fox News’ Bret Baier, concedes that a chained CPI is “is not preferred policy by this president.”)

In any event, the downsides of the record-setting $3.78 trillion budget overwhelm the upside. A quick summary of the budget can be found here, but here’s some of what you need to know: Over a 10-year period it would raise taxes by $1.1 trillion–on top of $1 trillion in taxes from the Affordable Care Act and more than $600 billion from the president’s recent tax hike. It increases spending by $964 billion. And it adds $8.2 trillion to our debt. The debt held by the public as a share of the economy is predicted to reach 78.2 percent in 2014–nearly double what it was in 2008.

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There is much one could say about President Obama’s Rose Garden statement on Wednesday announcing his FY 2014 budget. On the plus side, the president endorsed a “chained CPI”–a measure of inflation that is a more accurate way to factor rises in the cost of living into Social Security benefits. It’s a good idea, if quite a modest one (this Wall Street Journal editorial explains why there is less to it than meets the eye). And of course if the president really believed in a chained CPI, he would be a strong advocate for it rather than viewing it as a concession to Republicans. (Jay Carney, in this interview with Fox News’ Bret Baier, concedes that a chained CPI is “is not preferred policy by this president.”)

In any event, the downsides of the record-setting $3.78 trillion budget overwhelm the upside. A quick summary of the budget can be found here, but here’s some of what you need to know: Over a 10-year period it would raise taxes by $1.1 trillion–on top of $1 trillion in taxes from the Affordable Care Act and more than $600 billion from the president’s recent tax hike. It increases spending by $964 billion. And it adds $8.2 trillion to our debt. The debt held by the public as a share of the economy is predicted to reach 78.2 percent in 2014–nearly double what it was in 2008.

The Obama budget, then, continues the Obama project, which is to increase the size, the cost, and the reach of the federal government even as it continues to raise taxes. In that sense, it’s merely the latest extension of the progressive philosophy of President Obama.

But there’s another area worth focusing on: Poverty and care for the most vulnerable members of society. That was a repeated theme in Mr. Obama’s Rose Garden statement. The president said he would accept some ideas as part of a compromise–“if, and only if, they contain protections for the most vulnerable Americans.” He said “no one who works full-time should have to raise his or her family in poverty.” And the president said that unlike his opponents, “the people I feel for are the people who are directly feeling the pain of these [sequester] cuts–the people who can least afford it.” (Never mind the fact that the sequester idea originated with the president, not Republicans.)

The Obama message, then, is this: I care about the poor while Republican do not. The president, however, has a rather odd way of demonstrating his solidarity with the poor. To see why, it’s worth focusing not on a budget that will never be implemented but on conditions that touch real lives. For example, during the Obama years the U.S. has seen the highest poverty spike since the 1960s, leaving nearly 50 million Americans poor–including nearly 20 percent of the country’s children. The poverty rate has increased nearly every year of the Obama presidency (between 2011 and 2012 it was level). Income inequality has risen. Add to that the fact that the number of people on food stamps is at an all-time high of more than 47 million, compared to fewer than 31 million people on food stamps the month Obama was first elected.

Obama defenders will say that this is the result of the very nasty recession that hit the country in 2008, to which the response is (a) the recession officially ended the first summer of the president’s first term and (b) historically the worse the recession the stronger the recovery. Yet under Obama, we’ve experienced the weakest recovery since before the middle part of the last century. (Last Friday, amidst a terrible jobs report, we learned that the labor-force participation in March dropped to its lowest point since the late 1970s.) 

Now, I’m not inclined to blame every bit of bad news on the president or his policies (which is more than Mr. Obama ever did when it came to his predecessor). The problems plaguing our economy, and the causes of poverty, are deep and complicated. Still, the president’s economic policies have been, by any reasonable measure, a failure. And while many people have suffered because of it, none have suffered more than the most vulnerable members of our society.

The left likes to talk the compassion game. But it shouldn’t be too much to ask that progressives be judged by outcomes, not inputs; by real-world results, not rhetoric. By that standard, liberalism over the last several decades–from policies on welfare, crime and education to economics and family structure–has often done great and lasting harm to the poor. Conservatism is the best way to advance the common good. That is an argument more Republicans ought to think about making.

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Debt Denial, Entitlements, and the “Caucus of Common Sense”

The Obama administration and its supporters have created a problem for themselves. Having spent four-plus years using straw men to delegitimize opposing viewpoints, they are running out of clever ways to insult the intentions of those who disagree with them while also blaming them for the president’s mistakes. So while the sequester was the president’s idea, those who would let it stand rather than let the president dictate policy to Congress are outside the vastly outnumbered “caucus of common sense,” as Obama has taken to calling it.

That’s a catchy phrase, but they can’t all be winners: this week the president’s advisor Dan Pfeiffer sneered that those who are criticizing the president’s budget proposals want Obama to “enact a Romney economic plan.” (Blaming the previous president at least retained some sort of logic; continuing to go after Romney makes no sense and is marked by a certain classlessness Pfeiffer should try to avoid displaying on behalf of the White House.) But the old standard, and the one to which self-styled “moderates” will forever return, is the label of “centrism.” Heading into the weekend, the president’s former “car czar” Steven Rattner published a piece in the New York Times titled “Reclaim the Center.” Rattner attempts to put both conservatives and liberals on the fringe with regard to budget priorities, and lays out what a true centrist approach–his, of course–would look like. In the process, however, Rattner unwittingly ends up showing that, despite the media narrative of extremist Republicans, it is the left that is much farther from the supposed center.

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The Obama administration and its supporters have created a problem for themselves. Having spent four-plus years using straw men to delegitimize opposing viewpoints, they are running out of clever ways to insult the intentions of those who disagree with them while also blaming them for the president’s mistakes. So while the sequester was the president’s idea, those who would let it stand rather than let the president dictate policy to Congress are outside the vastly outnumbered “caucus of common sense,” as Obama has taken to calling it.

That’s a catchy phrase, but they can’t all be winners: this week the president’s advisor Dan Pfeiffer sneered that those who are criticizing the president’s budget proposals want Obama to “enact a Romney economic plan.” (Blaming the previous president at least retained some sort of logic; continuing to go after Romney makes no sense and is marked by a certain classlessness Pfeiffer should try to avoid displaying on behalf of the White House.) But the old standard, and the one to which self-styled “moderates” will forever return, is the label of “centrism.” Heading into the weekend, the president’s former “car czar” Steven Rattner published a piece in the New York Times titled “Reclaim the Center.” Rattner attempts to put both conservatives and liberals on the fringe with regard to budget priorities, and lays out what a true centrist approach–his, of course–would look like. In the process, however, Rattner unwittingly ends up showing that, despite the media narrative of extremist Republicans, it is the left that is much farther from the supposed center.

Rattner knocks the “delusional” idea held by many liberals that the skyrocketing debt is really nothing to be too concerned about. Here is how he frames the issue on both right and left:

The magnitude of these obligations is just too gargantuan to ever be fully reversed, but we must start now to bend that curve, particularly because any changes in Medicare and Social Security must be phased in over a long period of time. (The menu of policy options is, by now, familiar; we need to start making hard choices.)

That said, in a fragile economy, with the average American still earning less than he did a dozen years ago (after adjustment for inflation), federal belt tightening must occur gradually, a concept that is apparently foreign to both Mr. Stockman and Representative Paul Ryan, the chairman of the House Budget Committee.

You’ll notice something: though Rattner tries to make both sides look equally unreasonable, he doesn’t succeed. Conservatives are actually right about the problem–they just want to implement their solution too quickly for Rattner. In contrast, the liberal view, in Rattner’s telling, doesn’t face up to the existence of the problem in the first place, and thus left-wing “solutions” are destined to make the problem worse or, in some cases, consist of misidentifying the problem as the solution.

Though Rattner doesn’t say so, a good example of the latter view would be a post published the same day as Rattner’s piece in the Washington Post by Ezra Klein. Klein’s headline says it all: “Washington thinks entitlements are the problem. Maybe they’re the answer.” Klein writes that the “three-legged stool” of retirement income security–Social Security, private savings, and employer pensions–is collapsing, with only Social Security left standing. Private savings are in terrible shape, and employer-based retirement accounts are increasingly taking the form of 401(k)s, which are underfunded. He calls attention to a new study for the New America Foundation arguing the real crisis is that Social Security isn’t generous enough, and writes:

They would keep today’s income-based Social Security program, but add a “Part B,” which would be a flat payout to all retirees. When parts A and B are combined, all retirees would be guaranteed 60 percent of their average working wage in retirement, with low earners seeing closer to 100 percent replacement. Part B would be pricey, adding almost a trillion dollars to Social Security’s costs in 2037, and the authors don’t have a clear proposal, much less a politically realistic plan, for how to pay for it.

Repeat: the idea is for the government to add a trillion dollars to the cost of entitlements with no idea how to pay for it. In truth, that should really have been the end of the discussion. With no funding mechanism, it’s not a plan; it’s just a suggestion that the government gives lots more money to people. I don’t even understand the point of publishing the NAF “report.” It’s 27 pages and has four authors, but should really just be one sentence: People would have more money if we gave them more money.

You have to admit, it has a certain airtight logic to it. The president can call for a “common sense caucus” and his former economic advisor can demand they “reclaim the center” all they want, but they surely know where the holdouts can be found. And it’s not in the Tea Party.

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The Strange, but Revealing, Budget Process

I suppose it says something about Washington that the act of voting on a federal budget is now a symbolic exercise with relevance only to the next congressional election’s various campaign advertisements. But we are now represented by a Congress which approaches the budget process with no intention of enacting an actual budget. The only measure of true bipartisan agreement is that President Obama’s ideas are terrible, unable to muster any support on either side of the isle.

So the president has apparently given up. Among the many budget-related stunts and shenanigans this week was a House Republican demand for a vote on President Obama’s 2014 budget–which is currently nonexistent, and therefore a blank page. The Senate, which is controlled by Democrats, has been unwilling and unable to pass a budget; the House, controlled by Republicans, passed a budget today, as they do each year (a novel concept Democrats still don’t seem to understand). Both parties in the House presented budgets they knew wouldn’t pass before approving the GOP budget. That resulted in a frightening moment for the party in power, when they risked accidentally passing a budget produced by their own party that was not the one they actually wanted to enact. As the Hill reported on a Republican Study Committee-produced budget yesterday:

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I suppose it says something about Washington that the act of voting on a federal budget is now a symbolic exercise with relevance only to the next congressional election’s various campaign advertisements. But we are now represented by a Congress which approaches the budget process with no intention of enacting an actual budget. The only measure of true bipartisan agreement is that President Obama’s ideas are terrible, unable to muster any support on either side of the isle.

So the president has apparently given up. Among the many budget-related stunts and shenanigans this week was a House Republican demand for a vote on President Obama’s 2014 budget–which is currently nonexistent, and therefore a blank page. The Senate, which is controlled by Democrats, has been unwilling and unable to pass a budget; the House, controlled by Republicans, passed a budget today, as they do each year (a novel concept Democrats still don’t seem to understand). Both parties in the House presented budgets they knew wouldn’t pass before approving the GOP budget. That resulted in a frightening moment for the party in power, when they risked accidentally passing a budget produced by their own party that was not the one they actually wanted to enact. As the Hill reported on a Republican Study Committee-produced budget yesterday:

Democrats voted present to force more Republicans to vote against the Republican Study Committee’s (RSC) budget. Democrats hoped that by getting their members to vote present instead of against the budget, it might be approved by the House.

That would have allowed Democrats to train their campaign ads on the RSC budget, which would boost the Social Security age to 70 and cut Medicare benefits, including for people now 59 years old. The RSC blueprint would balance the budget in four years.

That is, for better or worse, our current budget debate in a nutshell. Democrats think the budget is terrible for the country, so they want it to pass; and though it does more to fix entitlements and balance the budget than any other GOP plan, Republicans wanted it to fail so they could then pass a budget that does those things less effectively but more palatably. The latter budget–Paul Ryan’s budget–passed this morning.

The Ryan plan sets the federal government on the path to a balanced budget and preserves Medicare. The Democrats in the Senate will respond with their own budget, which will increase spending and taxes and endanger entitlements by leaving them on an unsustainable path. Democrats are happy with both budgets, because they won’t have to worry about enacting their own plan and the fiscal ruin it is designed to bring upon the country, but they also think Ryan’s plan to save Medicare is unpopular and will hurt Republicans in the next midterm elections as Democrats ramp up their demagoguery and scare tactics.

On that note, Sean Trende has an edifying column today in which he cautions Democrats that they may be right about the Ryan budget, but they are taking much more of a leap of faith than they think. Democrats base some of the triumphalism on the belief that the Ryan budget, and more generally the talk of reforming entitlements and practicing austerity, cost the GOP votes in November. But Trende adds some context. The whole thing is worth reading, but Trende notes the exit polls showed the public trusted the GOP ticket on the economy more than Obama; that the claim that Republicans only held the House due to redistricting has been debunked; that demographics played a role in helping re-elect Obama that was unrelated, to a certain degree, to austerity plans; and that there were more supporters of Democratic candidates than of liberal policy objectives, among other insights into the polling data.

Additionally, Democrats had far less traction with this issue among key demographics than they expected. As the Palm Beach Post reported in August of last year:

But two Florida polls conducted since Ryan’s selection suggest that voters who are 65 and older support Ryan and his budget plan more than younger voters do. A third Florida poll released this week doesn’t include an age breakdown, but finds the state’s voters agreeing more with Ryan’s description of his budget and Medicare plan than with Democratic criticisms that it would “end Medicare as we know it.”

Democrats may think that bringing up the Ryan budget every year is going to pigeonhole Republicans as the party that wants to “end Medicare as we know it,” but it’s possible that the Democrats’ dishonest Mediscare tactics may lose their already questionable potency through exaggeration and obnoxious repetition.

Additionally, it will continue to draw contrast between the Republicans’ debt-cutting agenda, which is less popular than the GOP hoped but more popular than Democrats expected, and the Democrats’ steadfast refusal to take issues of debt and deficit seriously. After all the budget machinations this week, one thing remained constant: Republicans passed a budget with a plan to fix the nation’s finances, and Obama produced a blank sheet of paper. Both parties seem willing to take that message to the voters.

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No Way Around Entitlement Reform

Should the federal government’s balance sheet be treated the way a family approaches household finances? That’s the question at the heart of the renewed debate over Paul Ryan’s budget, President Obama’s spending, and the idea of balancing the federal budget. Conservatives argue that keeping a balanced budget is a basic expression of fiscal responsibility, and they point out that states have balanced budget requirements. Whether this makes it more or less compelling for the federal government to have a balanced budget requirement is up for debate, and the New York Times offers an in-depth survey of economists and experts on what the president derides as balancing the budget for its own sake.

Republicans seem to think that balancing the budget is a good political message to get behind, but they should be wary of how reasonable the other side comes out in stories like today’s Times piece, and they should also take into consideration the sometimes perverse unintended consequences of some efforts to force a balanced budget. Here is how the Times summarizes the two views:

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Should the federal government’s balance sheet be treated the way a family approaches household finances? That’s the question at the heart of the renewed debate over Paul Ryan’s budget, President Obama’s spending, and the idea of balancing the federal budget. Conservatives argue that keeping a balanced budget is a basic expression of fiscal responsibility, and they point out that states have balanced budget requirements. Whether this makes it more or less compelling for the federal government to have a balanced budget requirement is up for debate, and the New York Times offers an in-depth survey of economists and experts on what the president derides as balancing the budget for its own sake.

Republicans seem to think that balancing the budget is a good political message to get behind, but they should be wary of how reasonable the other side comes out in stories like today’s Times piece, and they should also take into consideration the sometimes perverse unintended consequences of some efforts to force a balanced budget. Here is how the Times summarizes the two views:

As sensible as a balanced budget might sound — much like a balanced checkbook for a family — countries are generally able to run modest deficits for years on end while still keeping debt stable as a share of economic output. One year’s deficit is effectively paid off by later economic growth, especially if a government is investing in public goods like roads and schools….

“It is important to reduce the debt, and balancing gets you there faster,” said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and a prominent Republican economist. “That’s paramount.”

He said a balanced budget is a goal everyone could understand. “It gives Congress a way to say no,” he said. “Transparency and political buy-in are important, and people understand balanced budgets. It has a lot of virtues.”

Having a balanced budget is one thing; how you get there is quite another. And this is what makes the conservative position more of a challenge than would first appear. There are two ways, essentially, of bringing the government’s budget into balance under current conditions, and they both contain pitfalls conservative politicians should be aware of. One way is via a balanced budget amendment. This has been part of the House GOP’s agenda for the last few years, and the argument for it basically echoes what Holtz-Eakin told the Times above: it forces the government’s hand.

But just as conservatives often lecture liberals on the unintended consequences of economic policy, they should take as a warning signal the unintended consequences of state balanced budget amendments. In New Jersey, for example–though this practice is not confined to the Garden State–the state government has to work with debt limitations and balanced budget requirements, and simply utilized accounting tricks that are becoming increasingly popular to get around them. As the Mercatus Center points out:

While the New Jersey Constitution’s debt limitation clause restricts borrowing by requiring voter approval, the New Jersey Supreme Court has permitted broad exceptions to this rule, allowing the state to issue debt through independent authorities and to use debt to balance the state’s operating budget.

In at least 33 states, independent authority debt has become more common in recent years as a source of financing capital projects, emerging as a “particularly blatant evasion” of debt limitation clauses contained in state constitutions.

That doesn’t preclude the possibility that a balanced budget amendment can be designed to be airtight–but that brings up another obstacle. An airtight balanced budget requirement could enable the growth of entitlements and other popular spending by telling the government that they absolutely must raise taxes to meet budget demands. Such an outcome would be the worst of both worlds.

But that brings us to the other way to balance the budget: the old-fashioned way, by simply spending responsibly. The challenge here is twofold: first, it does not have the enforcement mechanism the amendment would (hopefully) have. And second, the Senate is controlled by the Democrats and President Obama still has no plans to dramatically cut spending. Entitlement reform is necessary, but it’s also easy to demagogue. As President Obama has made all too clear, if the Republicans want to reform entitlements, they have to control Congress and the White House; they won’t have any help from Democrats who are always thinking about the next election.

It is not, as the media and Democrats love to pretend, ideological extremism or Randian heartlessness to want the government to spend within its means and keep a balanced budget. But conservatives are going to have to win the public’s support for entitlement reform to get there. The debate over the balanced budget may prove to be a detour, not a shortcut.

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The Folly of Sequestration and the Legacy of Andrew Jackson Higgins

On May 25, 1942, the waters off Norfolk, Virginia played host to a dramatic competition between military landing boats designed by Andrew Jackson Higgins and those used by the Navy. Army Major Howard Quinn, after observing the contest, wrote to his commanding officer that “there was no comparison”–the Higgins boat was the better craft. Quinn was on hand to watch the competition along with a member of the Truman Committee, led by then-Senator Harry S. Truman to investigate waste in the U.S. military’s war production. The contest had come at the behest of Truman, whom Higgins had convinced of the superiority of his boat.

The switch was made; the boats were mass-produced, and were integral to the success of the landing at Normandy. Had the military not had the Higgins boats, Dwight Eisenhower later said, “The whole strategy of the war would have been different.” And it wasn’t just the boats. As William Lee Miller writes in his book about the intersection of the lives of Truman and Eisenhower, Truman claimed to have saved $15 billion with his committee’s recommendations, by tackling “the prodigious waste in constructing camps, the shortage of essential commodities like rubber, magnesium, and aluminum; the protection of the consumer economy and the expansion of the labor pool. The committee also exposed corruption in war production.”

The reason the committee was considered such a success is because it enabled the military to cut wasteful spending while improving military readiness, equipment, and combat capability. Six decades later, then-Senator Hillary Clinton sought to take advantage of the negative reporting and unpopularity of the wars in Iraq and Afghanistan by invoking Truman’s name in a Wall Street Journal column full of righteous anger at perceived corruption and incompetence in war management during the Bush administration. The following year she was serving as the public face of the foreign policy of an Obama White House proposing to make cuts to the military decried by his own secretary of defense and whose devastating effect on military readiness has already begun to encroach on the line separating theory from reality.

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On May 25, 1942, the waters off Norfolk, Virginia played host to a dramatic competition between military landing boats designed by Andrew Jackson Higgins and those used by the Navy. Army Major Howard Quinn, after observing the contest, wrote to his commanding officer that “there was no comparison”–the Higgins boat was the better craft. Quinn was on hand to watch the competition along with a member of the Truman Committee, led by then-Senator Harry S. Truman to investigate waste in the U.S. military’s war production. The contest had come at the behest of Truman, whom Higgins had convinced of the superiority of his boat.

The switch was made; the boats were mass-produced, and were integral to the success of the landing at Normandy. Had the military not had the Higgins boats, Dwight Eisenhower later said, “The whole strategy of the war would have been different.” And it wasn’t just the boats. As William Lee Miller writes in his book about the intersection of the lives of Truman and Eisenhower, Truman claimed to have saved $15 billion with his committee’s recommendations, by tackling “the prodigious waste in constructing camps, the shortage of essential commodities like rubber, magnesium, and aluminum; the protection of the consumer economy and the expansion of the labor pool. The committee also exposed corruption in war production.”

The reason the committee was considered such a success is because it enabled the military to cut wasteful spending while improving military readiness, equipment, and combat capability. Six decades later, then-Senator Hillary Clinton sought to take advantage of the negative reporting and unpopularity of the wars in Iraq and Afghanistan by invoking Truman’s name in a Wall Street Journal column full of righteous anger at perceived corruption and incompetence in war management during the Bush administration. The following year she was serving as the public face of the foreign policy of an Obama White House proposing to make cuts to the military decried by his own secretary of defense and whose devastating effect on military readiness has already begun to encroach on the line separating theory from reality.

“Of course, we need far more than a Truman Committee,” Clinton declared back in 2008. “We need the Truman spirit in the White House, where the buck finally stops.” Clinton is strangely silent on her former boss’s proposal to slash the military unless he gets more tax increases (the president’s supporters in the media and blogosphere like to refer to this tactic as “hostage taking”–when Republicans do it). But perhaps she should speak up, unless back in 2008 she was merely playing partisan politics with the armed forces and grandstanding from her Senate perch instead of expressing genuine concern about the American military.

These cuts to the military are part of sequestration, intended to make a dent in deficit spending. Will risking “hollowing out” the military at least get our budget issues under control? No, it won’t. As Philip Klein writes over at the Washington Examiner, the Congressional Budget Office’s newest 10-year spending forecast expects federal annual tax receipts to increase by 65 percent, revenue as a share of the overall economy to increase, spending on social security to go up by 67 percent, spending on federal health programs to balloon by 94 percent, and defense spending to increase 20 percent over that time period, bringing overall defense spending as a share of the federal budget below the historical average. Klein concludes:

These numbers, taken together, make it abundantly clear that the only reason for additional tax hikes at this point would be to chase skyrocketing spending on entitlements. Paying for this spending wouldn’t be a matter of asking the very rich to pay a little more — it would necessitate large tax hikes on the middle class that far exceed historical levels.

Sequestration is not about cutting “waste, fraud and abuse” or improving the efficiency of the U.S. military. It is about raiding a piggy bank to pay (unsuccessfully) for an ever-expanding welfare state, to which the president’s health-care reform legislation will only add as costs continue to rise, premiums increase, Medicaid rolls are expanded, and insurance consumers are shoved off of employer health plans and into government-subsidized exchanges. The result will be a nation even more deeply in debt but now also, thanks to the president’s bright idea, far less able to defend itself from threats and less able to do its part on behalf of global stability and security.

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Obamism in a Single Sentence

The most striking sentence in President Obama’s second inaugural address was his assertion that “preserving our individual freedoms ultimately requires collective action”–by which he means more government. It is a succinct statement of the equation of government with freedom, and of the implicit corollary: the more government, the more freedom it can provide. This is why Obama expressed no concern yesterday about the multi-trillion-dollar government debt he once thought unpatriotic: Medicare, Medicaid, Social Security, and other government spending “empowers our citizens” and “free us to take the risks that make this country great.” When freedom is defined in this fashion, those who want to reduce government spending are striking a blow against “freedom.” They’re unpatriotic.

Obama reportedly said last month that government has no spending problem–only a problem of reducing the cost of healthcare. Yesterday he said we must “make the hard choices to reduce the cost of health care and the size of our deficit”: in other words, deficit reduction means giving government more power to control the cost of providing freedom. Reduce the cost of health care, and the deficit will go down, but do not restrict government itself–that would be restricting freedom. This is why Obama insists on raising tax rates without spending reductions; on increasing the debt limit without spending reductions; and on enacting any future spending reductions only if “balanced” with new revenue (so that if you want him to reduce spending, you must give him more money to spend). Higher tax rates, more debt, and new revenues give government the resources to keep us free–thus the more, the better, by definition.  

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The most striking sentence in President Obama’s second inaugural address was his assertion that “preserving our individual freedoms ultimately requires collective action”–by which he means more government. It is a succinct statement of the equation of government with freedom, and of the implicit corollary: the more government, the more freedom it can provide. This is why Obama expressed no concern yesterday about the multi-trillion-dollar government debt he once thought unpatriotic: Medicare, Medicaid, Social Security, and other government spending “empowers our citizens” and “free us to take the risks that make this country great.” When freedom is defined in this fashion, those who want to reduce government spending are striking a blow against “freedom.” They’re unpatriotic.

Obama reportedly said last month that government has no spending problem–only a problem of reducing the cost of healthcare. Yesterday he said we must “make the hard choices to reduce the cost of health care and the size of our deficit”: in other words, deficit reduction means giving government more power to control the cost of providing freedom. Reduce the cost of health care, and the deficit will go down, but do not restrict government itself–that would be restricting freedom. This is why Obama insists on raising tax rates without spending reductions; on increasing the debt limit without spending reductions; and on enacting any future spending reductions only if “balanced” with new revenue (so that if you want him to reduce spending, you must give him more money to spend). Higher tax rates, more debt, and new revenues give government the resources to keep us free–thus the more, the better, by definition.  

In his erudite and important book, I Am the Change: Barack Obama and the Crisis of Liberalism, Claremont professor Charles R. Kesler explained that Obamism is the logical outcome of the progressive redefinition of freedom over the past century–and is creating a tipping point as the price of government-provided “freedom” increases beyond the ability of the private sector to finance it (my PJ Media review of the book is here). With his single sentence yesterday, Obama provided the movement with its new clarion call: ask not what “freedom” costs (or even what it means); ask what you can do to let government tax, borrow and spend to provide more of it.

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Happy New Year, America

If you’d like to have your New Year’s Eve thoroughly ruined, I’d suggest taking a look today at Mortimer Zuckerman’s piece over at USNews.com, “Brace for an Avalanche of Unfunded Debt.”

It’s so depressing because it’s true. The federal government keeps its books not in ways that most clearly reveal the true financial picture, but in ways designed, quite deliberately, to obscure that picture. This is for the short-term benefit of politicians and nothing else, the country be damned. And, as Zuckerman notes, unless something is done about this, and soon, that is exactly what the country will be.

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If you’d like to have your New Year’s Eve thoroughly ruined, I’d suggest taking a look today at Mortimer Zuckerman’s piece over at USNews.com, “Brace for an Avalanche of Unfunded Debt.”

It’s so depressing because it’s true. The federal government keeps its books not in ways that most clearly reveal the true financial picture, but in ways designed, quite deliberately, to obscure that picture. This is for the short-term benefit of politicians and nothing else, the country be damned. And, as Zuckerman notes, unless something is done about this, and soon, that is exactly what the country will be.

As he points out, the country is incurring future financial obligations at the rate of $8 trillion a year. That exceeds the total taxable income of everyone earning more than $66,198 a year and all corporate profits. Even a liberal should be able to understand that if future obligations in entitlements are rising at $8 trillion and the total taxable income of the middle class and up, plus corporations, is $7 trillion, “getting the rich to pay their fair share” won’t do the trick.

The good news, of course, is that these future obligations are not like the national debt, which is at $16 trillion and rising fast. The debt is an inescapable obligation because we pledged the “full faith and credit of the United States” when we borrowed the money. The only alternatives don’t bear thinking about: repudiating the debt or inflating it away.

As Zuckerman points out, it costs $359 billion to service the debt at today’s very low interest rates. Should interest rates begin to rise, either because of returning prosperity or a loss of faith by the market, the cost of servicing the debt will increase $150 billion for every percentage point rise in interest rates. We’re currently paying about 2.2 percent on the debt. Greece is paying over 16 percent to borrow money. As they say: you do the math.

Unlike the debt, future entitlement obligations are obligations only because current law says they are, and laws can be changed. For instance, if we were to, 1) change the formula by which cost-of-living increases in Social Security payments are calculated so that it didn’t overstate inflation as the formula does now, and 2) gradually increase the age of eligibility to reflect ever-increasing life expectancy, Social Security would become solvent for the foreseeable future.

The annual cost-of-living adjustment is designed to keep recipients’ purchasing power intact, but it currently gives them, in effect, a raise. Is it really too much to ask of recipients that they get what’s due them, not more? Likewise, would raising the age of eligibility one month for every year future recipients are now under the age of 55 incur unbearable political opposition? Not if politicians, starting with the president, do their jobs and, you know, lead, explaining the truth and showing the way out of trouble. I have a news bulletin for the political class: the American people are neither stupid nor selfish. Tell them the truth and they will accept it.

But to do that—to tell the American people the truth about the financial situation of the country—requires that politicians surrender the power to keep the books in self-serving ways. The country needs just what corporations have: a set of accounting rules they are obliged to follow that reveal the truth, not conceal it, and an independent authority to certify the books as honest and complete, including future obligations. (The Congressional Budget Office, which “scores” legislation, is nonpartisan, but it is by no means independent. It is a creature of Congress and has no choice but to do Congress’s bidding, which is political protection first, the truth a long-way second.)

There will be no long-term solution to the impending financial disaster until the government keeps honest books. The sooner this fact is on the country’s political radar and becomes part of the discussion, the better. There is not a lot of time left.

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Sandy Aid Package Another Excuse for Pork

In the midst of the fiscal cliff negotiations, the Obama administration has provided us with a perfect example of why we’re in this situation in the first place. The president has put together a $60 billion emergency aid package for superstorm Sandy victims, which needs the approval of Congress. As with any large spending package, it’s filled with pork. ABC News first reported on the specifics of the bill, including the most outrageous requests:

$2 million to repair roof damage at Smithsonian buildings in Washington that pre-dates the storm; $4 million to repair sand berms and dunes at the Kennedy Space Center in Florida; and $41 million for clean-up and repairs at eight military bases along the storm’s path, including Guantanamo Bay, Cuba.

The Small Business Administration is seeking a $50 million slice of the pie for its post-storm response efforts, including “Small Business Development Centers and Women’s Business Development Centers.”

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In the midst of the fiscal cliff negotiations, the Obama administration has provided us with a perfect example of why we’re in this situation in the first place. The president has put together a $60 billion emergency aid package for superstorm Sandy victims, which needs the approval of Congress. As with any large spending package, it’s filled with pork. ABC News first reported on the specifics of the bill, including the most outrageous requests:

$2 million to repair roof damage at Smithsonian buildings in Washington that pre-dates the storm; $4 million to repair sand berms and dunes at the Kennedy Space Center in Florida; and $41 million for clean-up and repairs at eight military bases along the storm’s path, including Guantanamo Bay, Cuba.

The Small Business Administration is seeking a $50 million slice of the pie for its post-storm response efforts, including “Small Business Development Centers and Women’s Business Development Centers.”

Congressional Republicans concerned about the national debt and spending are now exactly where the Obama administration wants them–stuck between a rock and a hard place. Approving the bill adds unnecessary billions onto a package that was only meant to do one thing–provide emergency support to Northeast victims of the superstorm. Yet stopping the bill in the House would allow the president to portray congressional Republicans as out-of-touch political animals, denying victims of one of the worst storms in U.S. history assistance. The Obama administration’s response to Republican resistance to the package sounds exactly like any individual in debt and confused about how they got there:

“The aid to federal agencies is a very small percentage of the entire package,” the official told ABC News.

Just because the wasteful percentage of the package is quite small in comparison to the overall expenditures doesn’t mean that it should be passed as-is. The only way for Americans to stop digging ourselves into debt is by starting to distinguish needs from wants, and unfortunately that means that we might not have as many “Women’s Business Development Centers” as we might like. By trimming the fat, Americans can ensure that future generations will be at least able to provide for their needs, and maybe one day, their wants as well.

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Paul Ryan’s Extraordinary Budget

Today Paul Ryan, chairman of the House Budget Committee, released his budget. (For the full budget, see here; and for a summary, see Ryan’s Wall Street Journal op-ed here). About this remarkable document, I want to say two things.

The first is that Ryan’s budget does what Americans generally, and the pundit class in particular, says politicians don’t do. It tackles head on the issue of entitlements. It offers a real path to re-limiting government (over the next 10 years it cuts more than $5 trillion dollars from President Obama’s budget). It makes the “hard choices” that elected officials often avoid.

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Today Paul Ryan, chairman of the House Budget Committee, released his budget. (For the full budget, see here; and for a summary, see Ryan’s Wall Street Journal op-ed here). About this remarkable document, I want to say two things.

The first is that Ryan’s budget does what Americans generally, and the pundit class in particular, says politicians don’t do. It tackles head on the issue of entitlements. It offers a real path to re-limiting government (over the next 10 years it cuts more than $5 trillion dollars from President Obama’s budget). It makes the “hard choices” that elected officials often avoid.

To be specific, Mr. Ryan’s budget proposes structural reforms to Medicare, the highly popular program that is driving us toward fiscal ruin. The Ryan budget faces up to, rather than denies or ignores, certain mathematical and demographic realities. For a variety of complicated reasons, very few political leaders have been willing to do so.

In his 1986 book The Triumph of Politics, David Stockman, at the end of his 411-page lamentation, wrote this:

Why did the conservative, anti-spending party (GOP) end up ratifying a half-trillion dollar per year welfare state? In the answer lies the modern dirty little secret of the Republican Party: The conservative opposition helped build the American welfare state brick by brick during the three decades prior to 1980. The Reagan Revolution failed because the Republican Party decided to stick with its own historic handiwork. It could not and would not disown after November 1980 the “me-too” statism that had guided it for all those years in the political wilderness.

Now I strongly dissent from Stockman’s judgment that the Reagan Revolution failed; and I understand why people consider Stockman to be an unadmirable human being. But he was actually on to something important in his critique of Republicans, conservatives, and big government. An objective analysis of the Reagan years showed that the commitment to limited government was more rhetorical than real. There was no sustained effort to reform entitlement programs during the Reagan presidency. That may have been prudent, by the way. President Reagan was much more successful at, and much more committed to, cutting tax rates, reforming the tax code, and rebuilding the American military. There was simply no real public support for reforming the modern welfare state among the American polity.

Today we live in a different, and fiscally more perilous, moment. In the past, we could avoid dealing with entitlement programs, even if doing so wasn’t wise. But today dealing with them is a fiscal — and arguably a moral — imperative. That’s because right now we’re on a Greece-like trajectory.

More than any other single individual in American politics today — perhaps with the exception of Indiana Governor Mitch Daniels — Ryan understands this and is willing to do something about it. That was true last year with his budget; and it’s true again this year with his budget. (The Path to Prosperity, it should be said, includes significant proposals to spur economic growth, including intelligent changes to our tax code and ways to contain and undo crony capitalism.)

The second point worth making about Chairman Ryan’s budget is that a year after he released The Path to Prosperity 1.0, Ryan and House Republicans have not only not been politically crippled, they are actually winning the argument, as well as converts (like Democratic Senator Ron Wyden) to their cause.

One of the most significant political facts of the last year has been that despite efforts by the president and his party to slander the GOP (including by claiming that Republicans were taking a Darwinian approach to autistic and Down syndrome children), it simply hasn’t worked. Ads showing Representative Ryan tossing an elderly woman in a wheelchair off a cliff are so ludicrous and discrediting that it’s mentioned these days far more often by Republicans than Democrats. That dog, having been unleashed for the last four decades, may no longer hunt. We may well be living in an era of uncommon fiscal sobriety and maturity. It is possible that what John Adams called stubborn facts — about the size, scope, and reach of government; about our structural deficits and debt; about how we will face a calamity unless we reform Medicare — are now driving our political debate, at least to a degree that has been missing in the past.

We’ll know more after the first Tuesday in November. But for now, Wisconsin’s Paul Ryan has done something quite remarkable. A Member of the House of Representative has shifted the political axis. He has filled the breach left by an unusually irresponsible chief executive. All honor is due him.

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