The next substantive move in the nation’s debt-and-deficits debate is up to liberals. But they’re not going to like it.
That’s because they’ll have to stop pretending they can be all things to all people, and decide which parts of their National Greatness Liberalism vision to give up.
This has more to do with math than politics. But it helps that politics has brought the math into focus.
By rights, House Republicans should not have been able to dictate the terms of the debt-ceiling deal the way they did. If Newt Gingrich couldn’t govern the country from Capitol Hill in 1995, John Boehner shouldn’t have been able to do it from one side of the hill in 2011.
He managed it not due to tea-party terrorism, but because even Democrats must know most of the public finds it silly to decry $1 of cuts in a decade for $1 of new debt in 18 months. There is a limit after all.
Determining what that limit is, and what fits under it, are the next big questions. What’s the limit? Let’s return to math.
Since the income tax’s creation, federal revenues have hit 20 percent of gross domestic product just three times: in 1944 and 1945, at the height of the war effort, and in 2000, when tech stocks were at their most bubblicious. Revenues have never touched 21 percent, no matter how tax rates rise and fall on millionaires or corporate jets.
True, the Congressional Budget Office has one forecast that puts revenue and spending alike at 23 percent of GDP by 2035. But reality won’t match this forecast, for two reasons:
First, as CBO itself acknowledges, lawmakers are unlikely to let tax policy stay on auto-pilot. For example, they’ll probably keep fixing the alternative minimum tax so that it doesn’t suck in the middle class.
Second, CBO forecasts do not try to take account of the ways tax policy affects taxpayers’ behavior. And changes in taxpayers’ behavior have always prevented revenues from rising as high as predicted.
CBO’s alternative scenario has tax revenues settling near their historical average at 18.4 percent. That’s more realistic. To balance the budget, as everyone claims to want, spending must stay around that level.
That brings us to: What fits under the limit? Which is a problem for the big spenders, because neither CBO scenario envisions spending so low.
In fact, spending on entitlements alone — Social Security, Medicare, Medicaid, the children’s health insurance program and Obamacare — is expected to hit 15 to 16 percent of GDP in the years to come as the population ages. Their take has already surpassed 10 percent.
Even if the defense budget shrinks to late-Clintonian levels, that will leave virtually nothing for everything else the federal government now does.
Lately, Democratic leaders in Congress and activists have said “no” to real entitlement reforms. President Barack Obama says he’s open to reforms, but he also wants to spend hundreds of billions on new projects such as high-speed rail.
Which brings us back to National Greatness Liberalism, and its dual themes: that the nation prospers via government “investment,” and that government should use this prosperity to take care of the less prosperous, a group whose membership requirements are forever defined down.
Math is making a fiction of the idea that these themes can co-exist. Politics dictates that liberals begin making some choices. Otherwise, we can settle in for many reruns of the debt-ceiling drama.
– By Kyle Wingfield