The Budget Free-for-All
There are three separate divides in the current budget battle in Washington. The one that has garnered the most attention concerns the near-simultaneous release of the first budget from Senate Democrats in four years and a competing plan from Wisconsin Republican Congressman Paul Ryan, the House Budget Committee chair.
The two plans are a trillion dollars apart in terms of taxes, and four trillion apart in terms of spending and deficit reduction over the next ten years -- the Grand Canyon would be easier to cross on a high-tension wire than bridging this gap.
Ryan has, in essence, reissued much of his earlier deficit-reduction plan, relying primarily on large reductions in the rate of growth of health care spending (still growing, but not as fast) in order to achieve savings of over $4 trillion in ten years on the way to a balanced budget. The Senate Democrats’ plan argues that it relies on an equal mix of tax increases and spending cuts, about 2 trillion in total over ten years, though over a quarter of the spending cuts are interest cost savings.
The Senate plan also includes $100 billion in new spending (sorry, "investments"), as well as about $700 billion in real cuts over ten years spread equally among health care, defense, and discretionary spending.
There is almost as much verbiage in the Senate budget attacking the GOP budget as there is explaining what they are offering.
There are two other divides that underlie the battles over any specific tax or spending changes in the new budget releases. The biggest one concerns whether there is a need for deficit reduction at all. For close to two decades, the general Washington, D.C. consensus was that at least lip service needed to be paid to the concept of deficit reduction; that is no longer the case. Both parties maintain that their new plans meet the targets set by the Simpson- Bowles Commission, or the the $4 trillion in ten years total deficit-reduction target that some say will put the nation’s finances on a more stable path.
The Ryan plan targets this level of deficit reduction just with its new spending cuts. The Democrats argue that when you include already enacted deficit-reduction steps, their new budget changes will also hit the big deficit-reduction targets. The Democrats, of course, claim that their approach is a "balanced" deficit-reduction plan, making use of the poll-tested language that President Obama has used frequently.
The multi-trillion dollar distance between the two plans is really an argument over several distinct questions:
- Is government spending too high, or too low?
- Are deficits too large or too small?
- If deficits are not a problem now, will they be a bigger problem when the percentage of Americans who are over age 65 is much higher, and the health care and retirement costs for this much larger group of Americans gets a lot bigger?
- Is the real problem now the deficit and accumulated debt (the latter growing as a share of the national economy), or the slowly growing economy and high long-term unemployment?
There is a significant chorus today among left-wing members of the D.C. punditocracy who are now arguing that government spending is not high enough, and that current federal deficit levels are too small. The loudest megaphone in this group belongs to New York Times columnist Paul Krugman.
Krugman has much in common with another well-paid and respected Times columnist, Tom Friedman. The Times has been paying for two columns a week from these writers, presumably in the expectation that they would get some new content every now and then. In Friedman’s case, most of his columns seem to focus on two pet peeves:
- Jewish settlements in the West Bank. If these were removed, it would presumably be only a few days until every other problem in the Middle East would resolve itself peacefully and successfully.
- Global warming. If America established a carbon tax and spent more on alternative energy, the Earth would stop warming and be saved for future generations (until a big asteroid hit).
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