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A Difference that Can’t Be Split

The parties have to fight over the budget because the status quo is untenable.

Mar 18, 2013, Vol. 18, No. 26 • By JAY COST
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This week Paul Ryan’s House Budget Committee is set to release its fiscal year 2014 budget, which promises to balance Uncle Sam’s books in 10 years. Ryan’s offering will elicit lamentations from the usual quarters of the mainstream media: House Republicans have lurched sharply to the right, they have abandoned the pragmatic principles of their forebears, they are now totally unfit to govern.

Paul Ryan: The fiscal chickens have come home to roost.

Paul Ryan: The fiscal chickens have come home to roost.

NEWSCOM

This view of congressional Republicans is weirdly shorn of historical context, as if today’s liberals have forgotten everything conservatives did in the past that outraged liberals. For instance, the GOP tried, unsuccessfully, to push root-and-branch reform of Medicare in the early part of George W. Bush’s administration. Before that, the GOP attempted to modernize Medicare during the “Republican Revolution” of the mid-1990s, and also met with failure.

Yet the leftists do have a point. After those failed attempts, Republicans in Washington largely abandoned their reform endeavors. Similarly, when Lyndon Johnson pushed for Medicare in 1965, House Republicans, led by Gerald Ford, offered an alternative program, but when that failed to pass, they lined up to support the liberal plan. So why do conservatives persist today?

The answer the left prefers—that conservatives are suffering from some kind of mass hysteria—is self-serving, as it casts congressional liberals and President Obama as the only responsible agents in government. It is also absurd. In fact, Ryan and House Republicans persist in the effort to get control of the nation’s budget because they see a civic obligation to prevent disaster. 

Last month, the Congressional Budget Office released its revised baseline for spending, taxation, and deficits for the next decade. It is not pretty. The gross federal debt is expected to increase by nearly $10 trillion over 10 years, from $16 trillion today to roughly $26 trillion in 2023. 

Beyond the 10-year horizon, the fiscal picture only gets worse. Without major reforms, the government’s vast array of health entitlements—starting with Medicare, Medicaid, CHIP, and Obamacare—are set to grow from about 5 percent of gross domestic product today to 9 percent in 2033, 12 percent in 2053, and 15 percent in 2073. There is no way the nation can afford that bill, absent a shocking increase in taxation. What’s more, taxes would have to be raised again and again and again, as health entitlements are expected to grow faster than the economy. 

The consequences of such a debt load are dire. As the CBO wrote last month: 

 The nation’s net interest costs will be very high (after interest rates return to more normal levels) and rising. Higher costs for interest eventually will require the government to raise taxes, reduce benefits and services, or undertake some combination of those two actions.

National saving will be held down, leading to more borrowing from abroad and less domestic investment, which in turn will decrease income in the United States relative to what it would be otherwise.

Much has been written about the nation’s awful budgetary outlook, but one aspect that is often overlooked is the effect the country’s debt and deficit will have on the American political landscape. 

Right off the bat, the looming debt crisis explains why House Republicans persist with a policy solution that has not been politically popular in the past. Today’s House GOP believes it has no choice; the duties of responsible governing require a solution to this problem, even if such a
solution is unpopular. Hence, House Republicans propose major reforms year after year, despite the pummeling they take from Democrats and their friends in the media.

The fiscal situation also explains why Senate Democrats have failed to produce a budget in four years. Senate majority leader Harry Reid has a hyper-transactional approach to politics, always preferring to shield his members from tough votes, or sweeten the pot for them when he has no choice. On the budget, he faces a seemingly intractable problem: Should he force his caucus to sign on to a budget that projects expanding deficits from here to eternity, or a budget that imposes a mix of unpopular taxes and entitlement reforms? Reid has chosen to do neither: His Senate simply ignores its obligation to produce a budget.

Together, the different approaches that House Republicans and Senate Democrats have taken in dealing with the nation’s fiscal mess illustrate the profound changes occurring in American politics. Reid has chosen the fiscally irresponsible but politically easy path; Ryan the opposite. It is either one or the other, because the two goals are now mutually exclusive. A responsible policy requires a departure from the status quo—meaning higher taxes, entitlement reforms, or both—that will be politically dangerous. 

This implies the beginning of a new era in American politics. For generations, dating back to the earliest days of the Industrial Revolution, Americans have been able to have their cake and eat it too. The growth of the economy always outstripped the social welfare ambitions of politicians in Washington. Thus, leaders could provide an ever-increasing stream of benefits to the citizenry—starting with generous Civil War pensions and ending most recently with Obamacare—without worrying that there would be no cash in the bank when the bill came due. In other words, economic growth has always ensured that, when push came to shove, pols never really had to make the hard choices. 

But no longer. As the CBO has made clear, the government’s obligations are right now growing faster than its capacity to pay for them. The future, in other words, is here. What this means in turn is that the center of American politics is no longer a responsible place for policymakers to reside. The era of guns, butter, and low taxes is at an end. 

Already, the country is in the slow, tortuous process of renegotiating the political settlement that generations of Americans have taken for granted. The adjustment will be completed only when the people recognize the scope of the problem and settle on broad parameters for addressing it. That has obviously not happened yet—poll after poll shows the average voter simply fails to understand what is driving the nation’s long-term, structural deficits. Nevertheless, the recent flare-ups over the budget—from the debt ceiling to the fiscal cliff to the upcoming continuing resolution—have all been as hot as they were because this change is now upon us. Politicians of generations past could pass a budget or agree to raise the debt ceiling without much trouble because they never really had to worry that the debt was out of control. Today, they have no such luxury. Hence the persistent fighting over what were once perfunctory tasks.  

Until the public makes up its mind about what to do next, all bets about American politics are off. The near-term political outlook is messy, fraught with finger-pointing, demagoguery, and vitriolic rhetoric as both sides try to position themselves. Over the last few cycles, we have seen wild swings in the political pendulum, and there is good reason to expect them to continue as the public comes to terms with the age of limits. 

Beyond that, projecting what will happen next is like trying to describe 1947 in 1927, or 1876 in 1856. Powerful exogenous forces are starting to reshape American politics, and it is simply impossible to say what the political divide will look like after they have finished their work. 

One thing, though, is clear: The political center as we know it today will no longer exist. For generations, Americans have demanded more, more, more from their government, which has been able to supply it without burdening the citizenry with onerous taxes. No longer. The time for painful choices is at hand.

Jay Cost is a staff writer at The Weekly Standard.

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