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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

The 2015 Budget Surplus Scenario



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James Pethokoukis cites a new report from Potomac Research to suggest that there is at least a slim chance that the U.S. federal government will achieve a budget surplus by fiscal year 2015. Pethokoukis makes the most important political points — a surplus will make it difficult for the Obama administration to make the case for further tax increases, yet it will also undermine the case for entitlement reform. But to be cynical and political for a moment, a surplus would be even worse news for the Republican Party. Since the start of the Obama presidency, the GOP has put all of its eggs in the basket of short- to medium-term fiscal consolidation. During the presidential race, some argued that while the politics of deficit reduction were not of particularly great interest to states with high unemployment rates, it did have some resonance for middle-income and upper-middle-income voters in states like New Hampshire and Iowa. In the end, a Romney campaign that placed a fairly heavy emphasis on the importance of deficit reduction lost New Hampshire and Iowa. And questions about Romney’s commitment to the economic interests of middle-income voters contributed to the Republican defeat in states like Ohio, Florida, and Virginia, each one of which has more votes in the Electoral College than New Hampshire and Iowa combined. 

So imagine 2016 in the unlikely but not completely impossible event that a budget surplus does materialize. Republican elevation of the deficit issue will allow the Obama administration and its Democratic allies to declare “mission accomplished,” all without taking the blame for entitlement reform. The House-passed budget that promised a balanced budget within the ten-year budget window by making unrealistically deep cuts in Medicaid and domestic discretionary spending will continue to be hung around the necks of congressional Republicans. One hopes that one or several of the GOP presidential candidates will devise a more compelling economic message and reform agenda. But this will have to be done in a near-vacuum, as conservative lawmakers have been emphasizing deficit reduction above almost everything else. This is why it is extremely, extremely important that the GOP find 2014 candidates who are committed to advancing the economic interests of middle-income households, and who can address this subject in a compelling, plausible way. Ramesh Ponnuru has sketched out what this agenda might look like in National Review and Bloomberg View – the template is there, but actual candidates need to step up. Josh Kraushaar of National Journal has been writing about how gun-shy Republicans have been in key Senate races, which is not the most encouraging sign.    



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