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Small Ball

Why our fiscal debates amount to nothing

Jan 14, 2013, Vol. 18, No. 17 • By YUVAL LEVIN
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But this disparaging view is unfair to both parties. In fact, there is a deeper disagreement at the heart of our fiscal debate. It is true that Republicans want lower spending (especially on entitlements) while Democrats want higher taxes (especially on wealthy people). But why is this what each party wants? In each case, the reason has to do with a vision of government, and of American life. The partisans standing in the way of a grand bargain are, at least implicitly, better attuned to the implications of the coming fiscal crunch than the centrist critics who just want to split the difference. 

 Our fiscal dilemma is, to oversimplify a little, an entitlement-spending problem. The network of programs and benefits created by the Great Society, but above all (by far) the Medicare and Medicaid programs, are growing much more quickly than the economy and federal revenue, and so are becoming unsustainable. They have already sent our debt up to levels seen only in the immediate wake of World War II, and in the coming years will send it far higher than it has ever reached in our history—limiting the potential prosperity of the next generation and running the risk of a sudden and disastrous crisis. 

Staying on this course is not an option, and two sorts of approaches away from it have emerged in our politics. One would preserve the structure of our entitlement programs more or less as it is and continually expand the government’s scope and revenue base to sustain them, and the other would preserve the government’s role and size more or less as it is (relative to the economy) but reform our entitlement programs to conform to those dimensions. 

It is crucial to see that both of these approaches are basically defensive in nature: The left is trying to avoid a fundamental transformation of the structure of our entitlement programs, since liberals believe the structure of those programs is key to their legitimacy and purpose, and so key to sustaining a just society. The right is trying to avoid a fundamental transformation of the relationship of government and society in American life, since conservatives believe the structure of that relationship is essential to American freedom and prosperity. The left would rather see American life altered (with a significantly larger government, a smaller and less active civil society, and a more consolidated but less dynamic economy) than see our welfare-state institutions reformed. The right would rather see our entitlement system altered (with lumbering universal entitlement programs turned into means-tested and market-based safety-net systems for the elderly and the poor) than see the character of our society transformed. 

Of course, neither side simply dismisses the other’s concerns. Conservatives think their reformed government would raise more revenue than today’s because it would enable the economy to grow more robustly. Liberals think their reinforced welfare state would cost less than today’s projections suggest because it would be better consolidated and so more effectively managed. But in these ways, too, their basic aims and their basic ideas about American society, government, and economics are at odds. 

Thus, Democrats want more revenue so that the entitlement system doesn’t have to be reformed, while Republicans want to reform the entitlement system so that the government doesn’t have to take up more of the economy. This means that doing a good deal of each at the same time would not give both parties what they want—it would give both parties what they are trying to avoid. 

A grand bargain with far higher taxes in return for a thoroughly transformed entitlement system would give each party the means it is after but at the cost of the end it is after. That would be a foolish bargain for both of them. They would rather do nothing, and so in fact they have done nearly nothing—reaching agreements to put off deadlines and avert self-inflicted pain but otherwise not changing the basic fiscal circumstances much. These tiny steps are worth taking, but they do not address the underlying problem. Since our deficits and debt grow larger in the meantime, there will always need to be another deadline set, and another crisis scheduled, but it is hard to see why those should turn out much differently, at least as long as either party has the electoral power to stop the other. 

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