Nancy Pelosi is remarkably consistent. During the election campaign, she attacked Republicans for proposals to tackle the nation’s fiscal problems. After the election, she is attacking the co-chairmen of Pres. Barack Obama’s fiscal commission for the same offense.
What was all that about how Americans can’t abide a “party of no” again? Alan Simpson and Erskine Bowles, the Republican and Democratic chairmen of Obama’s commission respectively, shocked Washington with a bipartisan proposal that isn’t the typical wishy-washy fare. It is starkly forthright about our fiscal mess and about potential solutions.
They say that “America cannot be great if we go broke,” and suggest a package with a ratio of roughly 3:1 spending reductions to tax increases for a total of $4 trillion in deficit reduction by 2020. Pelosi would prefer a ratio of 0:4 spending cuts to tax increases. The implicit Democratic deficit plan is to career toward bankruptcy, then hike taxes as much as possible.
Pelosi deemed the Simpson-Bowles proposal “simply unacceptable.” AFL-CIO president Richard Trumka thundered that the two had told “working Americans to ‘drop dead.’” When introducing his chairmen in February, Obama praised them for their “willingness to tell the hard truths even when it’s hard.” It’s so hard partly because the president’s party savages anyone who doesn’t favor the remorseless expansion of the welfare state as a cruel enemy of the elderly and the poor.
Amid all the budget wonkery, the simplest number in Simpson-Bowles — which still has to be considered by the broader commission — is 21 percent. The proposal would cap revenues at 21 percent of GDP, and eventually bring spending in line with revenue.
The Left can’t accept that number. It means giving back the federal government’s gains of the Obama era, when federal spending has spiked to more than 24 percent of GDP. And it is inconsistent with the massive subsidy regime of Obamacare. Democrats didn’t trash their House majority in the spending splurge of the past two years only to go back to George W. Bush levels of expenditure.
The Right isn’t — and shouldn’t be — happy with 21 percent, either. It would be a historically high tax take by the federal government. Christopher Papagianis of the think tank e21 calculates that federal revenues averaged 17.8 percent of GDP from 1946 to 2008. For five decades, Washington absorbed less than 20 percent of the economy without courting utter fiscal ruin.
Given the trajectory, though, 21 percent looks better. Absent any other action, bracket creep and other factors will increases taxes to more than 23 percent of GDP by 2035. Social Security, Medicare and Medicaid are about 10 percent of GDP now. By 2035, thanks to the retiring baby boomers, they’ll be 16 percent all by themselves.
In this context, 21 percent is a starting point. It makes clear what the direction of government’s size should be: downward. Simpson-Bowles has its flaws. Among other things, it cuts defense and accepts the fiscally ruinous architecture of Obamacare. But it includes serious proposals to cut discretionary spending, to put Social Security on a sounder footing, and to broaden the tax base while simplifying the code and bringing the top rate down to 23 percent.
The next move is President Obama’s. He constantly says the debt is “unsustainable.” Either he’s going to play against type and cut government, or he’ll need to raise taxes on the middle class. For all the controversy over the Bush tax cuts for “the rich,” ending them would only generate $700 billion in revenue during the next ten years. The real money is in the Bush tax cuts for everyone else — $3 trillion over ten years. Democrats are extending those and exempting them from the “pay-go” rules so they don’t have to find countervailing spending reductions.
Simpson and Bowles delivered the kind of fresh, fearless thinking Obama said he wanted. But the comfortable, stale politics of Nancy Pelosi beckons.
– Rich Lowry is editor of National Review. He can be reached via e-mail, [email protected]. © 2010 by King Features Syndicate.