This Week's Debate: Congress and the Budget
Flashback to 1994:
Anyone remember the Contract with America? It was that less-than-1000-word document that outlined what Republicans would do if they gained control of the House. And lo, they rode that contract right into the majority.
Item number one of the contract promised "a balanced budget/tax limitation amendment and a legislative line-item veto to restore fiscal responsibility to an out-of-control Congress, requiring them to live under the same budget constraints as families and businesses." As it turned out, they couldn't muster the votes to pass a balanced budget amendment to the Constitution -- which would have been a dangerous limitation in times of crisis when some deficit spending really is necessary -- but that doesn't mean they had to abandon the very principle of a balanced budget. At the least, it would be nice if they produced a budget that was reasonably close to balanced. (Of course the Contract also said something about eliminating waste and fraud, but apparently those minor details have fallen by the wayside as well.)
After passing $50 billion in painful spending cuts aimed largely at programs for the poor, the House has now passed twice that amount in tax cuts. In this Debate, we'll try to reach some conclusions on several budget-related questions. Perhaps most importantly: Assuming budget cuts must be made, which expenditures ought to get the ax?
As I see it, there are two parts to cutting expenditures. The first part is not terribly controversial: identifying and cutting government waste (renting office furniture when buying it would be more cost-effective, buying plane tickets and never using them, or duplicating functions already performed by another part of the government.) The second part is political dynamite: Deciding which programs and subsidies should be eliminated.
Someone, somewhere is always going to be benefiting from this spending and powerful lobbies are often involved -- as in the case of farm subsidies and sugar subsidies* -- so politicians tend to prefer to avoid spending cuts. Unfortunately for them, and us, the soaring budget deficit and the billions it will cost to rebuild the hurricane-ravaged Gulf Coast have made substantial cuts inevitable. But which costly programs and subsidies should drop off the government's priority list?
Entitlement programs, which apparently accounted for more than half (see item 2-6) of the federal budget in 1999, could be cut. However, the problem with many of those entitlements is not that they shouldn't exist, but rather that there is too much unnecessary spending within the programs. In the Medicare drug benefit, for example, the government could save a lot of money if the legislation didn't prohibit negotiating with drug companies for lower prices.
The Republican Study Committee proposed "Operation Offset." The plan advocates deep cuts in social programs like Medicare and Medicaid, slashing foreign development, and even eliminating aq bunch of programs promoting clean energy and conservation (curiously, those items mostly fall under the "corporate welfare" section. Call me old-fashioned, but I would contend that the real corporate welfare is all those tax shelters and loopholes. Close those and watch the dough roll in.) The libertarian Cato Institute offers this list of possible cuts, which rightly targets farm subsidies but is perhaps a bit premature (or just wrong) when it proposes cutting NASA's budget in half, saying, "NASA is obsolete with the arrival of private manned space flight."
There's no question that spending, particularly on pork projects, is out of control. And many fiscal conservatives, like economist Milton Friedman and George Will, are livid that it's a Republican-controlled Congress and a Republican administration that are ushering all this spending through.
The Jaded JD has a super blog entry titled "The beast never starves (or, How I Learned to Stop Worrying and Love the Deficit)" in which it says:
The difference between the anti-taxers and the deficit hawks, and why we deficit hawks are the true fiscal conservatives, is that we deficit hawks recognize that a balanced-budget requirement with > $7T in previously aggregated national debt is a lot worse than a balanced-budget requirement with ~ $3T in previously aggregated national debt. We fiscal conservatives--we deficit hawks--recognize that someone has to repay that aggregated national debt, and it's morally wrong to impose that burden on future generations (who will have their own 9/11s, Iraqs, and Katrinas to deal with).
Given our economic situation, what kind of tax policy makes the most sense? Do we need more tax cuts to stimulate the economy? Or is it time to restore taxes to pre-Bush levels in an attempt to reverse the last five years of increasing deficits?
Gerald Preante writes in the Tax Foundation's blog:
Lower capital gains and dividends taxes are typically preferred economic policy as they will lead to higher investment (all else equal). There are, however, other factors that need to be in the minds of lawmakers with regards to spending and tax policy, specifically the budget deficit. When governments must borrow, they are taking away money that would otherwise have been invested throughout the global economy, which can be a negative for investment. Therefore, given our current circumstances, there are multiple competing factors playing out when taxes on capital gains and dividends are changed.
What do you think, Debaters? Is this revenue-suppression sustainable? Is the country going to hell in a debt-ridden hand basket? Or is our economy perfectly capable of handling any debt we throw at it, as Kudlow's Money Politic$ blog's rosy economic picture might suggest? What steps, if any, do you think the government should take to ensure America's continued economic might?
*As I've mentioned before, I am not a member of the Post editorial board; the opinions expressed here are my own. I just happen to agree wholeheartedly with them when it comes to farm and sugar subsidies. If you haven't read Sugar for Trade, go check it out.
By Emily Messner |
December 14, 2005; 5:07 AM ET
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