Capital Commentary is the weekly current-affairs publication of CPJ, written to encourage the pursuit of public justice.


Budget Politics & Debt Reality


Michael J. Gerson

03-30-2012


March 30, 2012

By Michael J. Gerson

This is a transcript of a radio address broadcast on KDCR radio in Sioux Center, Iowa.

The debate in Washington has turned once again to the federal budget, with the House of Representatives passing Congressman Paul Ryan’s 2013 budget plan this week, a measure not likely to pass in the Senate.  Democrats, who control the Senate, are highly critical of the House Republican blueprint, arguing that it undermines the protections of Medicare and would require dramatic cuts in essential public services.  But congressional Democrats have been too internally divided to pass their own budget proposal for nearly three years.

The budget debate is often difficult to follow—and  not only because it involves a lot of numbers and projections.  The process is highly political.  The initial offer—like the one we’ve just seen from House Republicans—is a negotiating position.  It is designed to set out a maximal ideal that holds the elected members of a party together.  It is, by definition, not fully attainable, unless a party controls the elected branches of government with large majorities.

In the normal course of events, leaders of both parties must come to a compromise on the budget, leaving neither side completely happy.  But that process seems broken.  Negotiations for a grand budget compromise between President Barack Obama and Speaker John Boehner failed last year amid recriminations. 

In all the politics and posturing, it is worth keeping two hard budget facts in mind.

First, there is no solution to our budget problems without the reform of health entitlements such as Medicare and Medicaid. These programs are essential to millions of people.  But, as currently constituted, they are unsustainable.  Health care inflation and longer life expectancies are driving up public costs dramatically.  By the 2030s, federal health care commitments, along with interest on the national debt, will consume just about all government revenue.  Nothing would be left for defense or education or foreign assistance or other forms of poverty relief.  And well before that point, the American government would face a fiscal crisis similar to what we have seen in Europe.  Unless we reform the social safety net, we cannot maintain the social safety net. 

Second, an eventual budget agreement that addresses the entitlement crisis will also involve more revenue.  Federal taxes as a percentage of our economy are currently rather low, about 15 percent of GDP.  The House Republican budget just passed would eventually raise that figure to 18 or 19 percent of GDP, in line with historical levels.  But confronting our debt problem—while maintaining important national commitments on poverty, global health and national security—would probably require federal revenues at 20 to 21 percent of GDP. There is nothing magic about these figures, but they seem realistic.

Of course, not all taxes are created equal.  Some hurt economic growth more than others.  Large tax rate increases are probably bad idea, a failed policy America escaped in the 1980s.  But removing many of the deductions that distort the tax code—what economists call “tax expenditures”—is probably unavoidable.  These range from ethanol subsidies to the mortgage interest deduction. 

None of this will be easy.  It will be difficult for many Democrats to accept serious entitlement reform.  It will be difficult for many Republicans to accept revenue increases.  And it will be difficult for both sides to agree on the shape of necessary legislative changes.  But eventually, compromise will be needed, and Americans will need to support it.    

—Michael J. Gerson is nationally syndicated columnist who appears twice weekly in The Washington Post and is the author of Heroic Conservatism (2007) and the co-author of City of Man: Religion and Politics



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