So here–in non-ideological terms that hopefully make common sense–is why we cannot afford such cuts: based on a number of easily identifiable factors, like our aging population and infrastructure, our government is going to need more, not less, revenue in the future.
That’s not a liberal or conservative message. It’s not a message intended to poke the hornets’ nest of hard right Republicans. It’s just the reality based on a bunch of stuff that’s happening.
Stuff like what?
Well, first of all, like inflation and population growth. Even if you’re against increasing real spending per person, you’re implicitly for higher spending based on inflation and population growth. Over the next 10 years, population and price growth combined are projected to grow by about 37 percent, meaning that’s the increase it would take to hold constant real, per-capita spending.
Second, there’s demographics, or to make it personal, aging boomers: we’re gray, we’re here to stay and we’re not going away!
Well, not for a while, anyway. The figure above shows that the 65 and up population is around 15 percent of the total today, stabilizing a bit north of 20 percent around 2040. The point is again a mechanical one: the fact that a larger share of the population will be in the age ranges supported by Medicare and Social Security implies more spending. According to the Congressional Budget Office’s latest projections, by 2025, spending on Social Security and Medicare will need to go up by just under 2 percent of GDP (over $500 billion of projected 2025 GDP).
Needless to say, that won’t happen if we pass tax cuts anything near the magnitudes being proposed by Republican candidates.
Of course, killing social insurance may be the point, but a) that ain’t exactly how they’re selling it, and b) as I’ll elaborate below, the provision of social insurance is an essential public good. Even if you don’t like “government,” private markets won’t efficiently provide this and other critical functions.
Next, there’s our troubled infrastructure. The American Society of Civil Engineers tracks the conditions of our roads, bridges, waterways, electrical grid, airports, and so on. I grant you that asking them about the fiscal infrastructure gap–the difference between what we need to spend and what we’re planning to spend on public infrastructure–is a bit like asking your barber if you need a haircut. But their analysis is thorough and well-researched…and for goodness sake, just look around! They argue that the funding gap is $1 trillion by 2020 and over $4 trillion by 2040 (around 5 and 15 percent of GDP, respectively).
So on a non-partisan basis, adjusting for prices, population growth, demographics, and the fact that roads and such wear out, we’re going to need more revenue, not less. If you agree, then you can’t in good faith support the massive tax cuts being proffered, even if you sprinkle supply-side fairy dust on them.
On the other hand, you might want to argue I’m stacking the deck because I’m assigning these functions to the public sector when the private sector could take them up. The logic here would be that you’d cut the heck out of taxes and households could use the extra income to pay for privatized public services.
But this invokes the objection I raised above: because they cannot adequately profit from them to the extent that society needs them, private businesses will under-provide public goods. Once again, that’s not liberal or conservative. In every advanced economy across the globe, the government is called upon to do the things the private market can’t do, won’t do, or won’t do as efficiently as the public sector.
Defense is an obvious example, one I haven’t even gotten into, though the tax cuts on offer would gut that function as well. But this category also includes social insurance, public infrastructure, safety net programs for the poor, environmental maintenance, education, and who knows what else (think recessions, wars, floods, droughts, wildfires, and since I’ve been watching the show “Zoo” on Netflix, a conspiracy by the animal kingdom against humans).
Okay, let’s say I’ve convinced you I’m right about all of this but you’re taking solace in the view that even if one of these massive tax cutters gets elected, they won’t be able to pull off tax cuts that would so significantly shrink the federal government.
Maybe, but we’re kind of living though a microcosm of this problem as we speak. Current funding levels are constrained by budget caps that are already squeezing important programs. Non-defense discretionary spending, which funds everything from scientific research to veterans’ care to transportation, has been flat in real terms for the past several years and is projected to fall to its lowest percentage of GDP on record in 2017 (with data back to 1962). According to state fiscal expert Michael Leachman, these budget caps mean declining federal contributions to state and local governments that “will make it increasingly hard for [them] to meet core responsibilities like educating children, keeping drinking water clean, maintaining roads and bridges, and providing fire protection.”
Jason Furman, the Obama administration’s chief economist, broke it down pretty simply: “You can’t support both sequestration and repairing our infrastructure.”
And it is simple, really. The nature of public goods is such that if we skimp on social insurance, the maintenance of our bridges and public schools, and nutritional support for families facing hard times, no one’s going to step up and make up the difference. We’ll just have less retirement security, broken bridges, and undernourished and less well-educated kids, the impact of which reverberates for years.
So when you hear wonks like yours truly inveighing against the loss of trillions to the Treasury, we’re not trying to get between you and some fat tax cut. We’re trying to protect vital functions that make our society what it is against reckless policies that will turn it into something most of us do not want it to become.