With yawning federal deficits and the need to once again raise the U.S. government’s staggering debt north of the current $14.3 trillion ceiling, both feuding parties, as usual, lack the political courage to cut welfare to their own supporters. For example, Republicans protect the defense budget, the vast majority of which has nothing to do with fighting terrorism or even the three unneeded wars the government is now prosecuting, but instead distributes welfare to defense contractors and subcontractors strategically spread around the country to win more congressional votes for the pork. Democrats from congressional districts and states with heavy concentrations of such industries or military bases also help out. On the other hand, the Democrats, pretending to stick up for the downtrodden, love to shovel largess to the middle class via the non-means-tested Social Security and Medicare programs and other entitlements. As we’ve seen by Republicans defecting en masse from the attempt by Paul Ryan (R-Wisc.) to privatize Medicare and reform Medicaid, even “heartless” Republicans are also scared to cut such popular programs. So everyone wants to cut someone else’s candy, but the votes aren’t there because they are afraid their own will be cut. It’s sort of a mutual-assured-destruction situation transferred from the nuclear weapons field to the budget arena.
But although politicians get grief for being political cowards (which they are), they are only doing what the electorate wants. Deep down, both Republican and Democratic politicians believe something needs to be done about the monstrous and dangerous deficit and debt, but they are scared to do anything because, unfortunately, the American people want their government handouts but are unwilling to pay for them. Also, politicians usually reach a logjam over what should be cut and whether taxes should be raised to reduce the deficit and constrain the debt.
As an attempt at a solution to this budgetary gridlock, I have previously proposed across-the-board budget cuts and an accompanying justification for politicians: “In these times of fiscal peril, we all must sacrifice to restore national solvency.” The debate is shifting slowly my way.
To break the impasse caused by attempting to negotiate specific spending cuts to prevent American default by failing to raise the national debt ceiling, the parties are now negotiating targets and triggers, if the goals are not met, to make automatic future cuts in the budget and/or tax breaks. For example, President Barack Obama has proposed a target of cutting the deficit to 2.8 percent of GDP (the value of the economy) by 2014 (the deficit last year was almost a whopping 9 percent of GDP) or automatically cutting spending and tax breaks for individuals and corporations. The Republicans, however, want to avoid cutting tax breaks in favor of establishing targets only on spending and triggering automatic spending reductions if the targets are not met.
Here the Republicans have a superior plan, because the share of American government spending (federal, state, and local) as a percentage of GDP has grown to approximate the drag that European governments have traditionally put on their economies and economic growth—in 2010, in America, it was 40 percent. Congress needs to reduce the beast, not increase taxes to pay for bloated government. Soon, the private sector will not be big enough to pay for the oversized, slothful government monster.
If only the Republicans were really serious about their plan. They are good at yelling about fiscal responsibility when they have been thrown out of the White House, but they are rarely the party of small government while occupying it. For example, of the $3.2 trillion dollars in federal debt accumulated since 2000, the Bush administration, which had a Republican Congress most of the time, is responsible for $2.6 trillion of it. Moreover, historically, since Harry S. Truman, Democratic presidents surprisingly have been much better on annualized change in spending a portion of GDP and annual change in the deficit as a percentage of GDP than Republicans. Since Truman, the all-time champion budget-cutter was not Ronald Reagan, but Bill Clinton, who was the only president to not only reduce federal spending as a portion of GDP but also to reduce federal spending per capita.
But actually both parties are disingenuous, because they are proposing future targets and automatic triggers to actually avoid draconian across-the-board changes. They hope the terrifying prospect of those cuts will help them to reach agreement on specific spending reductions, thus preserving more of their treasured programs. Even worse, the blanket cuts can probably be avoided by fudging the numbers and gradually and quietly relaxing the targets—as happened in the 1980s, during the Reagan and George H. W. Bush administrations, when the Gramm-Rudman-Hollings law was passed, which set declining deficit targets to reach a balanced budget in five years under the specter of across-the-board cuts.
Such budget gimmicks of targets and triggers are no substitute for political will. Bill Clinton exhibited that will in the 1990s—although he raised taxes and benefited from a strong economy, he also cut spending substantially and turned huge deficits into surpluses. To reduce the dangerous size of government, we need to regain political will and have across-the-board spending cuts now, not as a hollow threat at some future date. Maybe the country’s fiscal peril will prompt the politicians to lead, but I doubt it.