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The Next Budget Battle
Republicans lost this fiscal debate. Here’s a plan to win the next one.

House Budget Committee chairman Paul Ryan

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Michael Tanner

Hold the line on taxes: Already the president is back to talking about the need to include additional revenues in any budget agreement, a so-called balanced deal that, for instance, “closes corporate tax loopholes that don’t help create jobs.”

It should be recalled that the president got a ten-year, $617 billion tax increase as part of last January’s fiscal-cliff deal and that Obamacare includes $1.2 trillion in new taxes over the next ten years. That’s a total of $1.8 trillion in taxes he’s already won.

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In fact, the Congressional Budget Office estimates that revenue will reach 18.6 percent of GDP by 2015, the highest level since 2001 and slightly above the post-war average. Washington has a spending problem, not a revenue problem.

Even that bastion of establishment liberalism the Washington Post opposes tax hikes as part of this deal, editorializing:

The temptation for Democrats, as always, will be to insist on higher revenues — a non-starter with the GOP — in exchange for entitlement reform. We hope they won’t. More tax money is part of the long-term fiscal fix. At the moment, however, what’s vital is fixing spending priorities. Even over the long run, insufficient revenue is not the problem it was before the “fiscal cliff” deal that increased taxes on the well-to-do.

If Republicans end up to the left of the Post, something is terribly wrong.

Start reforming entitlements: The driving force behind future deficits and debt is not federal funding of Planned Parenthood, foreign aid, or the cost of Obamaphones but the skyrocketing growth in entitlement spending, notably Medicare, Medicaid, and Social Security. (Obamacare too, but that fight will have to wait for another day.) In fact, all domestic discretionary spending  – everything from the Department of Education to the Department of Commerce, the FBI to the FDA — will account for just 24 percent of federal spending by 2023, the lowest share since 1962. On the other hand, entitlements will consume roughly 54 percent of the federal budget.

Social Security’s unfunded liabilities top $23 trillion. Medicare is in even worse shape: Under the most optimistic scenarios, it faces almost $43 trillion in future red ink. If more pessimistic forecasts prove accurate, those unfunded liabilities top $88 trillion.

President Obama has hinted he’s willing to accept at least some entitlement reform as part of a larger deal. In his post-shutdown speech, for example, he admitted, “The challenge that we have right now [is] the long-term obligations that we have around things like Medicare and Social Security. We want to make sure those are there for future generations.”

Rather than get drawn into divisive battles over pet spending causes, Republicans need to go big, putting the president to the test and demanding fundamental entitlement reform.

The fight over Obamacare and the government shutdown was just one battle. Republicans lost that one. But the long war over the size, scope, and cost of government goes on. The next battle is under way.

And this one is winnable.

— Michael Tanner is a senior fellow at the Cato Institute and the author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.



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