Wednesday, July 6, 2011
The Deficit Comfort Zone
The Deficit Comfort Zone
Big Government is far too comfortable, and it’s crushing us.
by John Hayward
President Obama popped up for a little impromptu press conference on deficit reduction yesterday, perhaps realizing a bit of damage control was needed after the epic disaster of his “corporate jet” presser last week. This time, he focused on haranguing Americans for their irrational refusal to consider giving him more money.
Oh, there was a bit of lip service for fiscal restraint. “Right now, we have a unique opportunity to do something big to tackle our deficit in a way that forces our government to live within its means,” the President announced.
So that’s why Democrats have not exercised a shred of fiscal restraint since they took control of Congress in 2006! They’ve been waiting for the perfect moment to exercise their unique opportunity to save America from fiscal ruin. Any moment now, they’ll explode into action and save the day.
That’s why Democrats haven’t passed a budget in almost 800 days, with Senate Majority Leader Harry Reid commenting that it would be “foolish” for them to do so. That’s why Obama has offered absolutely no budget proposals since dropping a delusional $3.7 trillion budget at the front doors of Congress last February.
Remember that? It’s amazing even the most sycophantic reporter takes Obama seriously as a deficit hawk, when he abused his official opportunity at budgeting to freeze his wild 2008 - 2010 spending spree in place. Obama’s budget forecast trillion dollar deficits for the next four years, and would have left the deficit at over $500 billion forever.
But now the media lets him pretend that Republicans are the ones standing in the way of that “unique opportunity to do something big to tackle our deficit” because they won’t knuckle under on “ending tax cuts for the rich” – a tax increase that even the most absurdly unrealistic static projections indicate would raise no more than $69 billion per year. That’s about 4% of the current federal deficit, and only 1.8% of the total federal budget.
Obama said he hopes both parties will “get out of their comfort zones” and “leave ultimatums and political rhetoric at the door” in the coming budget negotiations. Isn’t the Democrats’ neurotic insistence on the sacrifice of a fiscally insignificant tax cut more symbolic of a “comfort zone” than anything Republicans have been saying lately? Haven’t the Democrats spent the last few months howling that Republicans are dangerous radicals for embracing Paul Ryan’s “Path to Prosperity” budget proposal?
The fact is that Big Government’s bulk is stuffed into a very comfortable hammock, swinging at the center of a deadly “comfort zone.” It has grown incessantly for decades. Sometimes that growth has been restrained a bit, but it has never been halted, much less reversed.
Government budgeting tricks allow politicians to describe reductions in the rate of spending growth as “spending cuts.” New government agencies grow like weeds… and instantly harden into stone, as every new program acquires a devoted constituency that will scream bloody murder if it gets cut… while the people who pay for these programs are denounced as “greedy” for quibbling over the few pennies of their tax bill that each individual program represents.
The manifest failure of government programs leads to energetic demands that they must be made larger, and given more power. Education in America has become a disgrace since Jimmy Carter gave us the Department of Education, but that department is eternal, its reduction or dissolution absolutely unthinkable. All of the big moves that could be made to reduce the budget, and let private industry take over where government bureaucracy has failed, are considered unthinkable. The borders of Big Government’s comfort zone are traced with the skeletal remains of ideas we are not allowed to think about.
Hollow promises of fiscal restraint tomorrow, in exchange for delicious new tax revenue today, are also part of that comfort zone. We’ve been here before. It’s not as if the strategy of Republicans exchanging tax hikes for Democrat promises of spending cuts has never been tried. President Reagan tried it, and the Democrat spending cuts never came.
Big Government remains comfortable by ignoring the dynamic effects of tax increases and tax cuts. These effects are empirically demonstrable – they are time-tested reality, not a complex theory cooked up in a conservative think tank. Tax increases never bring in the anticipated revenue, because taxpayers have strong incentives to evade the higher rates. Class-war tax increases targeted at the Evil Rich are even more disappointing in practice, because the Evil Rich are exceptionally good at evading high tax rates… and most of their evasive techniques result in reduced economic activity and higher unemployment.
Tax cuts, on the other hand, always result in more revenue to the Treasury. That’s because people expend less effort to evade lower taxes, and increased economic activity produces a much higher base of taxable revenue.
With that history in mind, why shouldn’t we look at the massive Democrat comfort zone – littered with broken promises, and centered around a black hole of unsustainable deficits – and ask when they’ll abandon their irrational intransigence on tax increases, so real negotiations can begin? Nothing is more stale and tedious than class-warfare rhetoric and discredited Keynesian schemes from the people who built up a $14 trillion national debt.
Doesn’t it make more sense to try something fresh and new, like actually reducing the size of government for a change, slashing the tax and regulatory burden on American citizens, and measuring the effect on the deficit, before we discuss another round of tax increases and “spending reduction” head fakes? The old tax-and-spend strategy we’ve followed for the past century will still be there waiting for us, if economic liberty doesn’t pan out. Republicans are willing to take a chance on the ingenuity and entrepreneurial spirit of the American people. Democrats want to take more of the private sector away from them. Tell me again whose feet are planted firmly in a comfort zone.
Posted by Brett at 8:59 AM