Cliff deal did little to reduce spending
That fat kid is just a tease; today’s Combat! is in fact mostly about charts and graphs. My brother sent me this wonky Wonkbook post about the deficit reductions achieved by the fiscal cliff deal. Both parties made a big noise about what they had accomplished, but in fact the spending cuts implicated in that agreement were paltry compared to those enacted by Congress in fiscal year 2011. About half of them came from the Budget Control Act, better known as the debt ceiling deal, better known as the time Congressional Republicans held a annual formality hostage and ultimately downgraded the credit of the United States. They did save a lot of money, though. Now who’s the party of intransigent theoreticians?
Okay, it’s still the GOP. All of their brutal, NPR-threatening budget cuts in the 111th were exceeded by the revenue generated from last week’s 4% tax hike on households earning over $450,000 a year—a measure with broad popular support that Republicans fought tooth and nail. They don’t want to reduce the deficit; they want to reduce spending, and the proof is in their opposite attitudes toward cut money an revenue money. In their campaign, the deficit fulfills roughly the same role Santa Claus does in the project of making children be good.
Rhetorical gamesmanship aside, though, federal debt is a huge problem. Even with the last two years of amelioration, debt is estimated to reach 90% of GDP a little outside of the ten-year budget window. That could be bad. In two widely-cited studies, economists Carmen Reinhart and Kenneth Rogoff argue that passing that threshold tends to reduce annual growth by 1% in developed economies. There are consequences to racking up enormous debts, even for countries that don’t really have to pay them.
Let us accept, then, the premise that we have to do something about the federal deficit. It seems unimaginable in today’s fiscal-political environment, but we should probably try to run a federal government that does not regularly spend more money than it takes in. Such a government is even demonstrably possible in the modern era: at the end of his presidency, Bill Clinton handed George W. Bush a federal budget surplus, which subsequently evaporated for reasons beyond anyone’s control.
There are reasons to believe that the Clinton era was a fiscal anomaly. It included a dot-com boom that, while quaint by today’s standards, bolstered an economy that performed very strongly. It also enjoyed the front-end benefits of a free trade policy that is probably responsible for gutting America’s manufacturing sector today—something that, it turns out, we could probably use to shore up our imaginary-paper-and-houses economy today.
But there was one element of the Clinton era surpluses that is absolutely in our control: taxes. That side of the fiscal cliff—the one that provided the only point of agreement for both parties in Congress—would have raised taxes to Clinton-era levels, as the epithet went. As you remember, the Clinton era was one of utter economic stagnation, when confiscatory taxes removed everyone’s incentive to work, and Americans who might otherwise have become wealthy and created jobs opted to wander the streets listening to Oasis instead.
Either that or everything went great, and Bill Clinton was the best Republican president we ever had. That old saw suggests how far rightward the GOP has drifted in recent years, and how successfully they have moved the goalposts when it comes to taxes. Ten years ago, George W. Bush barely shepherded his tax cuts through Congress by assuring everyone that they were only temporary. Two weeks ago, the parties were locked in negotiations over whether they should be made permanent for everyone or just for 98% of us.
It is not surprising that the one thing we can all agree on is we shouldn’t have to pay taxes. If you take our sample as “countries that have amassed enormous public debt,” it seems frankly inevitable. It is disappointing, however, that our leaders have so strikingly lost their ability to appeal to our better natures. Sooner or later, this country is going to have to pay its debt. Cutting spending will not do it, as the phrase “90% of GDP” so chillingly indicates. Raising taxes on the smallest slice of households will not do it, either. Either today or fifty years from now, we or our grandchildren well have to start paying for what we have bought. I can think of no cleaner measurement of the character of a nation than the time it takes us to do it.