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Why our fiscal debates amount to nothing

Jan 14, 2013, Vol. 18, No. 17 • By YUVAL LEVIN
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At some point, in other words, the fiscal question dividing the parties will be decided by voters. It will likely not happen in some dramatic fashion with one decisive election fought over the future of America, but in the normal and gradual course of our politics. It may even happen by accident—after an election fought mostly on other issues that gives one party or another enough control of the elected branches to advance its fiscal reforms. Until then, both parties will likely continue their defensive efforts, and seek whatever modest incremental steps are possible in an era of divided government. 


For Republicans, the challenge in the next four years (at least) will be to distinguish such constructive steps toward entitlement reform from blunt and counterproductive cuts that only weaken their hand in the long run. The right has actually been remarkably forthright about its policy goals—laying out, in the budget resolutions passed by the House of Representatives in 2011 and 2012, a set of ambitious reforms that point to a vision of government beyond the liberal welfare state. Although liberals have sought to depict it as radical, that vision entails a federal government of roughly its postwar size and functions, an economy growing at roughly its postwar pace, and an energetic and flourishing civil society. That is the America we have known, but keeping it will require bold reforms of government programs that capitalize on the efficiency of the market economy.

That vision, however, has taken the form of a post-Obama agenda for congressional Republicans. Many of them took the results of the 2010 congressional elections to suggest that the public had recoiled from the president’s ambitions, and so that his time in office was nearing an end. They spent the last two years getting ready for what would follow. But the president was reelected, and essentially none of the ambitious proposals of the Ryan budget can be adopted as they stand while Obama is in office. This has left Republicans in recent months in the peculiar position of being unable to list their demands in budget talks. Even as they are attacked for threatening entitlement benefits, they cannot name the incremental entitlement reforms they would like. 

Their task now is to use the broader vision laid out in the Ryan budget as a standard by which to distinguish good from bad incremental steps, and so to propose discrete, politically plausible reforms that not only reduce spending but lay the groundwork for the sorts of larger reforms they believe are needed in the long run. Many potential spending cuts—including many entitlement cuts, like the provider cuts in Medicare favored by some Democrats—would not meet this test, and should not be pursued. Those that do meet it would need to involve changes in the character of the entitlement system—making it more means-tested, more consumer-oriented, and more market-based. Some would do so modestly enough to be acceptable to some Democrats, and so to play a role in the coming fiscal struggles. Republicans have not yet developed their menu of such steps. This needs to be done swiftly, and its results must be presented to the public in the context of preserving the key functions of the entitlement programs while preserving American prosperity and freedom. 

The Democrats’ challenge is more serious, and has been made more stark in the wake of the fiscal cliff deal. They are truly in a reactionary mode, defending the existing entitlement system in essentially every detail and seeking ways to fund it. But the trajectory of our fiscal troubles suggests this may simply not be achievable. Over the last 40 years, federal spending (excluding interest payments) has averaged roughly 18.8 percent of GDP. The CBO projects that, on our current path, it will average roughly 24.2 percent over the next 40 years. The enormous increase in revenue required to support such an expansion is orders of magnitude greater than anything the Democrats have ever suggested to the public. Having just obtained, with great effort and controversy, the tax increase on the wealthy that has been nearly the entirety of their fiscal agenda for years, can they really go back and tell voters that they actually need to increase revenue by about 15 times as much merely to close the coming decade’s deficit and that keeping our debt in check after that will require taxes to grow more and more every year? 

Unable even to hint to voters what their vision of American government would require, the Democrats are unlikely to achieve it. And they cannot view incremental steps as building toward an opportunity to enact major future reforms, since their tax agenda likely cannot be made palatable in anything but tiny portions. They can never offer their fiscal vision in a liberal equivalent of a Ryan budget proposal. All they can expect are little increments that add up to little, which will make it difficult not only to add onto the edifice of the liberal welfare state but even to sustain it. 

The left has not even begun to contend with this problem intellectually, let alone politically. And the right has barely launched the effort to translate its agenda into bite-sized pieces suitable for budget talks in the Obama years. Both have much work to do, but neither is likely to see a genuinely grand bargain as a plausible way to advance its priorities at this point. 

That is not a failure of nerve, or a mark of the dysfunction of our political system. It is yet another odious consequence of the ill-conceived structure of the liberal welfare state, and of the fiscal calamity with which it now presents us—and it is a fact of our politics that will shape the remainder of President Obama’s years in office. Those years may well see legislative achievements on an assortment of issues, from immigration to patent law to education. But on the critical fiscal problems confronting the country, they are likely to see mostly dramatic, deadline-driven showdowns that result in much consternation but very little progress.


Yuval Levin is a contributing editor to The Weekly Standard, Hertog fellow at the Ethics and Public Policy Center, and editor of National Affairs.

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