Have you heard about these nuts who think that the world is going to end in May?
Not those nuts. These nuts.
Which is to say, Austan Goolsbee is full of it. He told the Chicagoland Chamber of Commerce: “If we hit the debt ceiling, we default.”
No, we don’t.
Debt service accounts for about 7 percent of federal spending. Current revenues will more than cover that, regardless of whether the debt ceiling is raised. We can pay our debts — and our troops, too — out of present revenues. But if we fail to raise the debt ceiling, we’re going to have to economize on some other things: discretionary spending, for sure, but probably also Social Security, Medicare, and Medicaid. But here’s the thing: Any meaningful budget-reform deal is going to have to address discretionary spending, Social Security, Medicare, and Medicaid, in the long term. There is no way around that. (Defense spending needs to be cut, too, but defense is a different thing from farm subsidies and NPR money: a core national priority. You don’t lump national defense in with national embarrassments such as the Small Business Administration or research grants for Obama’s magic unicorn-powered economy.)
In truth, the federal government expects to collect $2.2 trillion in revenue this year. The problem is that it wants to spend $3.8 trillion.
You can do a lot with $2.2 trillion. You can fund Social Security, Medicare, Medicaid, SCHIP, debt service, unemployment, welfare, and national defense at their 2008 levels. My recollection of 2008 is that it was not exactly a time of Spartan fiscal discipline.
Funding the majority of the federal government at 2008 levels is not “default.” It’s not anything like default. It’s not in the same category of things, events, or concepts as default.
So, don’t buy what Austan Goolsbee is selling.
What Republicans should do from here is to follow up on present plans to enact legislation ensuring that spending is properly prioritized — debt service first, then defense, then everything else — and take their sweet time about moving the official debt ceiling. They probably won’t get entitlement reform before 2012 — sorry, I wish it were otherwise, but I don’t think so — but they can get serious cuts and, more important, procedural limits on future borrowing and spending. And that’s what they should hold out for.
If a temporary return to 2008 spending levels is going to throw this country into shock and horror, then deficit hawks may as well pack it up and go home now, and just wait for the bond market to cut up Uncle Sam’s credit card — because what really has to be done is going to be more painful than that. But I don’t think there’s going to be blood in the streets.
I’ve heard responsible people on both sides of the aisle concede that they have a pretty good idea of what a deal probably will look like: a watered-down version of the Ryan entitlement reforms combined with something like the Simpson-Bowles tax increase — which is structurally a lot like the Ryan tax cut (lower rates, fewer exclusions and deductions). (For whatever it’s worth, Wall Street expects taxes to go up, and nobody seems terribly distraught about it.) Grover Norquist will scream that Republicans have violated their pledge — and he’ll probably be right, and it will still be the right thing to do if it balances the budget and constrains the future growth of the government.
And that’s the fight conservatives still have not won: We like to think that the American people are on our side when it comes to the size and scope of government, but they aren’t. Reforming entitlements is still going to be hard. Even reforming stupid spending is going to be hard: We all had a good laugh at Harry Reid’s federally subsidized cowboy poetry festival, but there are a million morsels of pork just like it, not to mention big non-pork spending that has to be addressed, too. And now, with a weak economy and a gloomy near-term outlook, conservatives are stuck doing the job we really should have done back in 1994–2000. But it’s not going to get any easier.
But on the debt ceiling? Let them sweat.
— Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.