It’s often said that Democrats want to raise taxes while Republicans want to cut entitlements.
That’s not quite right.
If they have to do something, Democrats would rather raise taxes (on rich people and oil companies) while Republicans would rather cut entitlements (for some distantly future retirees).
But Democrats have wealthy donors. Republicans have elderly constituents. Left to their own devices, both parties would neither raise taxes nor cut entitlements.
They would come together, in other words, to protect the status quo, which is to say a future of gradually rising debt. That’s a future in which spending on retirees crowds out spending on national parks, national defense, schools, research and the poor. It’s a future in which American prestige and power decline abroad while economic prospects dwindle at home.
What could shake them out of their own devices? One possibility, a fiscal hawk in the Obama administration told me almost wistfully, would be a “minor market event.” A stock market plunge, an interest rate spike, a race to the exits by America’s foreign lenders — just enough to spook Congress.
But as long as the Federal Reserve is gobbling up U.S. debt to keep interest rates low, such a mishap seems unlikely. And if a market event began, keeping it minor might be beyond anyone’s capacity. It could have terrible effects on jobs and prosperity. It isn’t really to be wished for.
That leaves one other forcing mechanism: a president who would make the case to the American people, repeatedly and clearly; who would provide cover for legislators of both parties to cast hard votes; who would lead the way.
You may ask: Isn’t that what President Obama is doing? Unlike the Republicans, who categorically rule out tax hikes, he has called for a balance of revenue increase and entitlement cuts. On the White House Web site, you can see his $400 billion in health-spending cuts, including a few tens of billions in short-term Medicare reform — paltry, but more than the Republicans, with all their supposed courage on entitlements, have proposed for the near term.
All true. If House Republicans are the standard, Obama wins.
But Obama promised better. Over and over, he vowed to face up to the “hard choices,” including regarding “our entitlement obligations.”
“[W]hat we have done is kicked this can down the road,” he has said. “We’re now at the end of the road. And we are not in a position to kick it any further.”
That was more than four years ago.
Now he reassures Americans that the nation’s fiscal problems can be solved with no pain. Middle-class taxes will never rise. A carbon tax is not to be mentioned. Pre-kindergarten education can be provided to all without increasing the deficit “by a single dime.” The only tax loopholes that need closing are distortions “that nobody really defends on their own,” as he told ABC’s George Stephanopoulos. Entitlement reform can be modest.
If it were that easy, even this Congress would have done it by now.
In fact, the loopholes Obama wants to limit are tax deductions that Americans not only defend but cherish: for mortgage interest, charitable contributions and state and local taxes. A government of the size he believes necessary will have to raise taxes, and not just on the rich. Social Security and Medicare can be reformed without harming the poor, but no one should pretend it will be easy to go from a society with about seven people of working age for each retiree, as in 1950, to fewer than three to one by 2030.
“I can promise you this,” Obama said last week, in a very different context. “Political leaders will never take risks if the people do not push them to take some risks.”
If that is as true for the budget as for the Israeli-Palestinian peace talks to which Obama was referring, there’s not much hope. Polls show that Americans want deficit reduction but oppose almost every policy that would achieve it. And explaining the right policy — long-term debt reduction without short-term austerity — is challenging.
That’s exactly why a president — especially a second-term president who gets the problem and can explain it — could make a difference.
Given the intransigence and polarization in Congress, there’s no guarantee Obama would succeed. But if he did, he could be remembered as the president who put the nation back on a path to healthy growth.
If he doesn’t try, he can be remembered, while the nation gradually declines, as the president who was somewhat more responsible than Mitch McConnell.