The Paranoid Style in the Republican Party...
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Politics and the Federal Deficit Mess

David Wessel reports:

The Federal Deficit Mess in a Single Sentence: Douglas Elmendorf, the director of the Congressional Budget Office, gave a speech the other day at the Association for Public Policy Analysis and Management. In it, he nicely summarized the federal government’s long-term fiscal problem in one sentence:

The country faces a fundamental disconnect between the services the people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those service...

Every thing else is detail.

One of the key details, I think, is that there are now three factions in American politics:

  1. Democrats who think that spending should be higher than today's tax level affords--but who think that resolving the gap is the Republicans' problem.

  2. Republicans who think that taxes should be lower than today's and projected future spending requires--but who think that resolving the gap is the Democrats' problem.

  3. Democrats who think that spending should be higher than today's tax level affords and who think that resolving the gap is everybody's problem.

Missing are (4), the Republicans who think that taxes should be lower than today's and projected future spending requires, and who think that resolving the gap is everybody's problem. I used to think there were such Republicans--Bob Dole, Pete Domenici, Warren Rudman, Phil Gramm, Gregg Judd. But a Berkeley colleague put me straight:

Domenici talks a very good game about fiscal prudence and stability--boy does he talk a very good game--but when the chips are down he does what the Republican Senate leadership wants him to do, and he does it all the time.

You can watch Keith Hennessey freak out over this absence, spinning like mad in an extraordinarily unconvincing way, here:

The inherited deficits fallacy: Director Orszag is correct that neither the Medicare drug benefit nor the tax cuts were offset with other spending cuts or tax increases. He fails to tell you that in 2003 Congressional Democrats wanted to spend more on Medicare drugs.... He fails to tell you that President Obama did not propose means-testing the drug benefit.... He also fails to tell you that President Obama’s budget proposes to continue $3.2 trillion of the 2001 and 2003 tax cuts and the AMT patches.... Director Orszag is picking and choosing particular policies to try to assign blame.  How much of future deficits are because future Medicare spending was not offset when Medicare was enacted in 1965? This is closely related to the PAYGO myth the Administration is trying to popularize....

Republicans, including President Bush, generally try to offset proposed mandatory spending increases with spending cuts.... This was violated for the Medicare drug benefit.... President Bush developed a proposal to package the Medicare drug benefit with dramatic changes to restructure fee-for-service Medicare and make it compete with private health plans on a level playing field. This proposal would have more than offset the increased spending from the drug benefit.  House Republican Leaders (in 2003) rejected these reforms and insisted on just doing the drug benefit because AARP and Congressional Democrats opposed the reforms...

The "Republicans, including President Bush, generally try to offset proposed mandatory spending increases with spending cuts..." is, as best as I can see, either a brazen lie, a sign that Keith Hennessey has lost all contact with our reality, or a sign that he is indeed a visitor from a parallel universe in which Larry Summers still has a beard.

Hennessey wishes that he lived in a world in which there were Republicans of group (4).

But that world isn't this one.

I urge him to (i) either come across the aisle and join us Democrats in group (3) (God knows we need help), or (ii) turn all his energies not to defending the really-existing Republicans of (2) by fighting with Peter Orszag but instead to trying to destroy them. Unless and until he limits their influence, the Republican ticket is simply not something that anybody who knows the federal budget numbers can with honor vote for...

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