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We Are All Deficit Cutters Now

12:00 AM, Apr 16, 2011 • By IRWIN M. STELZER
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President Obama got it right when he said the budget is about “more than just cutting and spending. It’s about the kind of future we want. It’s about the kind of country we believe in.” And, at long last, after years of the president’s ostrich-like approach to the huge federal deficits, and after months of partisan quibbling about less than 1 percent of the spending called for in the budget for this fiscal year, Americans will be given a choice. Never mind about the details: neither those contained in the president’s plan nor those in the alternative presented by Wisconsin Republican Paul Ryan, chairman of the House Budget Committee, will necessarily survive the bargaining process that is about to begin.

We Are All Deficit Cutters Now

Round one has gone to the Tea Party, much derided in the liberal press, and ridiculed by the foreign press as gun- and bible-toting ignoramuses infatuated with Sarah Palin and unlikely to hold a passport. Well, they have changed the national debate from how much more to spend to how much spending to cut, from deficits don’t matter to deficits are dangerous to the nation’s economic health. Doubt that and ask yourself whether the president who only a few months ago pushed for still another round of “stimulus” spending would ever have said, “Our debt has grown so large that we could do real damage to the economy if we don’t begin a process now to get our fiscal house in order.” His Treasury secretary, Tim Geithner, did not intend to, but in fact did, pay homage to the Tea Party for changing the entire national debate when he told a business conference that the U.S. has made a “fundamental shift … That's very important. It makes it very hard for future presidents, future Congresses to decide that you can live with the risk of higher deficits in the future.”

Let me paint with the broadest brushes. Barack Obama wants to restore the nation’s finances primarily by unspecified cuts in military spending, taxing those he considers to be rich, and practically rationing health care. This would enshrine in the budget three major themes of the Democratic left.

♦ Extend the Libyan model to all U.S. interventions. No use of force unless approved by the United Nations (presumably the blessing of the Arab League will not be needed in all future cases), and then only in conjunction with allies who will be expected to bear the major burden of any engagement. This avoids not only the cost of those interventions, but such expenses as are associated with maintaining U.S. forces in Germany at existing levels.

♦ Reduce the inequality of after-tax incomes by making the tax code more progressive—soaking the rich, in the vernacular. What the president considers to be “loopholes” will be plugged, and the tax rate on families earning more than $250,000 per year will go up, crudely stated by the president as eliminating “tax cuts for every millionaire and billionaire in society.”

♦ Maintain what the president calls “investment” and others call spending on education and infrastructure to better equip the country to compete in an increasingly globalized world, continuing the expansion of the role of the state that has been the hallmark of his presidency.

Over to Paul Ryan, the hero of the deficit cutters in the Tea Party and, I would guess, old-line Republican conservatives who favor a balanced budget at all times, and who believe that the only people more evil than John Maynard Keynes are his present-day followers. Ryan would cut the deficit by cutting spending, would not raise taxes, does not wish to take an axe to military spending, and wants to bring the budget into balance by relying heavily on a plan to convert Medicare into a subsidized insurance scheme that gives individuals control over their own medical budgets. Ryan and his followers believe that American citizens can spend their money better than the government can, and that taxing the rich is counter-productive because of its negative effect on incentives to work, and take the risks involved in setting up a small business. Inequality, they at times quietly say is an incentive to those at the bottom of the ladder to work their way up, and benefits that decouple work from income have a long-term negative effect on the ratio of wealth producers to government dependencies.

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