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Archive for July 25th, 2011

I’ve pointed out on several occasions that the burden of federal spending fell significantly during the Clinton years. Indeed, if we did nothing other than bring federal spending back down to 18.2 percent of GDP (where it was when Clinton left office), we’d have a budget surplus before the end of the decade (even with all the tax cuts made permanent).

Here’s a debate from a couple of months ago, but the issues haven’t changed. I debate Pat Choate (the 1996 running-mate of Ross Perot) about fiscal policy. I explain that spending is the problem and we could solve that problem by unwinding all the counterproductive spending of the Bush-Obama years.

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As a Washington policy wonk somewhat involved in the current debt-limit fight, I will confess that it is very frustrating that the White House has never produced a deficit-reduction plan. I’d much prefer a spending-restraint plan, of course, but I’m flummoxed that Obama has gotten away with doing nothing other than deliver some speeches filled with hollow platitudes.

So how does the GOP respond? Instead of loudly repeating “we’ve passed two plans and we’re waiting for Obama and/or Reid to put some cards on the table,” Republicans have been lulled into negotiations where the White House seems solely focused on getting GOPers to feed the spending beast (and undermine their own political prospects) by surrendering to a tax increase.

To make matters worse, Obama’s negotiating position was just strengthened by the so-called Gang of Six, which undercut GOP negotiators and enabled Obama to move even farther to the left.

Mark Steyn seems similarly frustrated and has an article that focuses on the absurd dishonesty of the White House. Here’s part of what he wrote for National Review.

Obama has done his best to pretend to take them seriously. He claimed to have a $4 trillion deficit-reduction plan. The court eunuchs of the press corps were impressed, and went off to file pieces hailing the president as “the grown-up in the room.” There is, in fact, no plan. No plan at all. No plan whatsoever, either for a deficit reduction of $4 trillion or $4.73. As is the way in Washington, merely announcing that he had a plan absolved him of the need to have one. So the president’s staff got out the extra-wide teleprompter and wrote a really large number on it, and simply by reading out the really large number the president was deemed to have produced a serious blueprint for trillions of dollars in savings. …The only “plan” Barack Obama has put on paper is his February budget. Were there trillions and trillions of savings in that? Er, no. It increased spending and doubled the federal debt. How about Harry Reid, the Senate majority leader? Has he got a plan? No. The Democrat Senate has shown no interest in producing a budget for two-and-a-half years. …The domestic media coverage of this story has been almost laughably fraudulent: To the court eunuchs, a failure to raise the debt ceiling by a couple of trillion would signal to the world that American government was embarrassingly dysfunctional. In reality, raising the debt ceiling by a couple of trillion without any spending cuts would confirm to the world that American government is terminally dysfunctional.

But while the short-term political maneuvering may be frustrating, the long-term implications are sobering, if not terrifying.

Writing in the Wall Street Journal, Arthur Brooks of the American Enterprise Institute wonders whether the United States is condemned to become either Sweden or Greece.

First, this is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism. Second, it is a moral fight, not an economic one. …Consider a few facts. The Bureau of Economic Analysis tells us that total government spending at all levels has risen to 37% of gross domestic product today from 27% in 1960—and is set to reach 50% by 2038. The Tax Foundation reports that between 1986 and 2008, the share of federal income taxes paid by the top 5% of earners has risen to 59% from 43%. Between 1986 and 2009, the percentage of Americans who pay zero or negative federal income taxes has increased to 51% from 18.5%. …despairing souls have concluded there are really only two scenarios. In one, we finally hit a tipping point where so few people actually pay for their share of the growing government that a majority become completely invested in the social welfare state, which stabilizes at some very high level of taxation and government social spending. (Think Sweden.) In the other scenario, our welfare state slowly collapses under its weight, and we get some kind of permanent austerity after the rest of the world finally comprehends the depth of our national spending disorder and stops lending us money at low interest rates. (Think Greece.) In other words: Heads, the statists win; tails, we all lose.

Sadly, I think the answer is Greece, for reasons Mr. Brooks already identifies. America is becoming a society where the top 20 percent pay a lot and the bottom 50 percent pay very little. When combined with demographic change, this is an unsustainable and unstable dynamic, very much akin to Greece. In Sweden, by contrast, the people paying the taxes and collecting the benefits tend to be the same. And even though taxes and spending are far too high, thus dampening growth, the rest of the economy is very free market and the entitlements are designed to be somewhat sustainable.

Let’s close this depressing post with a bit of gallows humor. Here’s a clever cartoon from Mike Ramirez at Investor’s Business Daily.

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