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Budget Compromise?

12:00 AM, Mar 16, 2013 • By IRWIN M. STELZER
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There are times when the absence of really, really bad news passes for good news. This is such a time here in America, at least for those who worry that our fiscal deficits of over about $1,000,000,000,000 per year will soon have historians referring to the glory that was Washington.

US Capitol Building at night Jan 2006

Since Obama was elected, the budget game has been played as follows. The president’s budgets fail to win a single vote in the Democratic-controlled Senate, and the House Republicans’ budget is not even brought to a vote there—derision on arrival. So the government has been operating without a budget, subject to repeated cliff-hanging deals. No consideration of how to handle the fact that the creaking baby boomers’ demands for new body parts to keep them frisky forever will soon exceed the funds available to cover that search for the fountain of youth, not to mention an ever-expanding list of other health-care costs, including a never-ending series of newly discovered “rights.”

The not-so-bad news is that this week the House and Senate each will vote on its version of the nation’s ten-year budget. The president has coolly decided to ignore the legal requirement that by early February he submit his budget to the congress for the fiscal year beginning October 1st, the White House announcing that Obama might find it convenient to submit his budget early next month. Arrest for ignoring the law is unlikely.

The House Republicans would balance the budget by 2023 by cutting spending on high-speed rail and financial regulation, and repealing Obamacare, which is viewed unfavorably by 48 percent of Americans (45 percent view it favorably). Pro-repeal Republicans are hoping (dreaming) that repeal will become a feasible goal when Obamacare’s cuts in reimbursements to health-care providers produce extensive queuing for medical care. Mitt Romney’s 2012 running mate, the estimably sincere Representative Paul Ryan, whose detailed knowledge of budgetary arcanalia is widely acknowledged, is leading the Republicans’ charge. He is sticking to his party’s pledge that the $600 billion tax increase the president won when Republicans blinked at the edge of the fiscal cliff will be the last such treasury bonanza in the Age of Obama. Revenue from plugged loopholes—a loophole is the other guy’s tax advantage—would be used to reduce marginal tax rates, not to fund new spending.

Senate Democrats see things differently. They would cut spending, but by far less than the Republicans, and raise taxes. About $1 trillion in cuts, 25 percent of these from defense, plus $1 trillion in new taxes on the wealthy over the next decade, would still leave a 2023 deficit of some 2.2 percent of GDP, but that is down from about 7 percent now and considered by many economists to be sustainable, but only if the economy grows at an annual rate of at least 2.2 percent. The Democrats’ wish list includes but is certainly not restricted to another $100 billion economic stimulus.

These competing budgets are the numerical reflections of very different views of the role of government. The Democrats are determined to provide the President with sufficient tax revenues to fund his vision of an expanded entitlement state, covering all Americans from day care, through university, into public sector and subsidized green jobs, their health care and pensions provided by the government—Winston Churchill’s phrase describing his country’s welfare state, “from the cradle to the grave,” just about covers it, except that pre-natal would be a more accurate description of the president’s starting point.

Republicans have given up any thought of shrinking the state: their budget actually allows for government spending to increase at an annual rate of 3-4 percent over the next ten years. Leviathan will not expire for lack of sustenance. But Ryan and his Republican allies are determined to shrink government’s share of GDP from its current level of more than 23 percent to a bit less than 20 percent by 2023—bigger government, but smaller relative to the size of the economy. Which is why they place considerable emphasis on policies to encourage more rapid economic growth.

Given the gap, no, chasm, that separates the parties’ notions of the role of the state, how it is to be funded, when and where means testing is appropriate, it would not be unreasonable to conclude that all of this is no different from recent blame-gaming, with a dollop of charm offensive by the president thrown in for whatever it might be worth.      

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