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To Level a Mountain with a Shovel

by Ramesh Ponnuru

Apparently that is the GOP approach to deficit reduction

Less than two years after facing the terrible possibility of seeing their party go extinct, congressional Republicans are beginning to face the even more terrifying possibility that they may take control of the House and even the Senate in the upcoming elections. Both the public and, even more intensely, Republican voters are alarmed by rising federal spending and the swelling federal debt. So perhaps the biggest challenge for the victorious Republicans will be enacting a budget that addresses their concerns.

What makes the task so daunting isn’t just the size of the gap between the federal government’s projected revenues and spending over the next decade. It’s that the largest and fastest-growing programs are popular. There is not much support for reining in Social Security and Medicare, even among those voters who tell pollsters they sympathize with the tea parties. One of the most successful Republican gambits of the last two years has been to oppose the Medicare cuts included in Obamacare. Because of the constraints of public opinion, even the boldest entitlement reformers favor gradual change that saves trillions in the long run but does not save much in the next few years.

Those same constraints lead Democrats and centrist commentators to insist that the budget cannot be balanced — the deficit cannot even be brought to a sustainable level — through spending cuts alone. Tax increases, and not only on the rich, are also said to be necessary. The mostly unspoken theory seems to be that budget balancing requires a kind of bipartisan conspiracy to couple unpopular cuts to middle-class entitlements with unpopular middle-class tax hikes.

A few Republicans are trying to disprove this theory. Rep. Paul Ryan of Wisconsin, the top Republican on the House Budget Committee and thus the likely chairman of the committee should his party take control, has gotten a lot of ink for his “roadmap” to reform the welfare state. He has also outlined a plan, cobbled together from other Republicans’ legislation, to save $1.3 trillion over the next ten years.

Ryan’s plan would keep the unspent stimulus funds from being spent, reduce support for Fannie Mae and Freddie Mac, freeze federal pay, and reduce spending in many other ways. Most of the savings, though, comes from one step: cutting spending to 2008 levels on all programs other than the big entitlements and then freezing it there. Over ten years that would lower federal spending by $925 billion.

The idea of a freeze, which would allow individual programs to grow or shrink so long as the overall target was reached, comes from Republican senator George LeMieux of Florida. Last year the senator suggested that the budget be rolled back to 2007 levels. His theory: Most people are making do with less in the recession; why not the government?

The Republican Study Committee, a group of conservatives in the House led by Rep. Tom Price of Georgia, takes this idea further than Ryan. The RSC plan keeps the Bush tax cuts and halts the growth of the Alternative Minimum Tax. But it also claims to generate $6.4 trillion less in federal debt than President Obama’s projected budgets, and even to produce surpluses in 2019 and 2020. It too freezes non-entitlement spending at 2008 levels; non-defense spending would take the brunt of the required cuts. And it implements a grab bag of other reforms to save money. Enacting medical-malpractice reform at the federal level would, according to the Congressional Budget Office, save the feds $54 billion over ten years. Ending Davis-Bacon, the law that requires the federal government to pay union scale on construction projects, would save money as well. The RSC plan would slash rail subsidies. Corporate welfare would also face the knife.

The House Republican leadership is trying to build a consensus for spending cuts among its membership. So far, the cuts on which they have built a consensus are modest. John Boehner, the House minority leader, is calling for a freeze on the non-security, non-entitlement parts of the budget. Eric Cantor, the second-ranking House Republican, is running an online project called “YouCut.” Every week visitors to his website vote on which of several spending cuts the Republicans should put to a vote on the House floor. After nine weeks, Republicans have voted for around $120 billion in savings.

Some supporters of small government think that the Republicans are only paying lip service to spending cuts. Brian Riedl, budget analyst at the Heritage Foundation, is one of them. “The stuff they’re putting out is way too vague and non-specific. Even the thing Boehner put out applies to only one-eighth of the budget,” he says. “Republicans have offered nothing but platitudes, with the exception of Paul Ryan.” Riedl believes that Washington should freeze all government spending, excluding interest on the debt — which would require starting to phase in entitlement reform. Compared with current policies, that would yield $7 trillion in savings.

Congressman Ryan himself is more encouraged by the growth of interest in spending cuts among his colleagues. He was surprised at how many votes his relatively lean budgets have gotten. “The handwringers nervous about spending cuts won’t be the problem” if the Republicans take over the House, he says. A lot of the new Republican congressmen will be “people more interested in the cause than in a career.”

But nobody thinks that these spending-cutters will have veto-proof majorities. That’s why one thing the new congressmen, and their friends in the tea parties, might be wise to do is to change the way Congress enacts spending legislation. It passes 13 big appropriations bills that fund all of the government except for the entitlement programs. This method of budgeting arguably works in favor of pro-spending interests.

For one thing, each spending program does not need to command majority support in the legislature to receive funding; it just has to be included in a bill that has majority support. And if the president wants more funds for one of his priorities, he can veto the entire bill — shutting down a portion of the government, including programs that most congressmen favor. The example of the Gingrich–Clinton standoff over the budget in 1995 and 1996 suggests that the political reaction to a shutdown works in the president’s favor.

If Congress broke up these big spending bills into many smaller ones, the balance of power would change. Congressmen would have less incentive to support bloated spending on one program to secure funding for their own programs. A fiscally conservative House majority could identify the lowest funding level that could attract 218 votes for each small spending bill. Or it could simply fail to include some programs in any appropriations bill, leaving Obama with no money to spend on those programs and nothing to veto. It might be possible to defund — or, rather, not fund in the first place — parts of Obamacare in this way.

Any such change to the budget rules would require overcoming the entrenched members of the appropriations committees, who tend to like the power to spend money that the current set-up gives them. It would also require wrenching change in the Senate, where considering more spending bills would, on present rules, take a lot of time. But 2011 might be the right time to move forward with such a reform — if, that is, Congress really is filled with new legislators who are not immersed in the old ways of doing business and are committed to the cause of cutting government.

Both the optimists and the pessimists among conservatives agree that the debate over fiscal policy needs to keep historical averages in mind. Over the last 50 years, federal spending has made up about 20 percent of the economy on average; federal revenues have run at about 18 percent. As Riedl points out, federal revenue as a share of the economy is expected to be higher than its 18 percent historical average by the end of the decade even if all the Bush tax cuts are extended. Features of the tax code such as “real-income bracket creep” are responsible for that growth: As the economy grows, more people move into higher tax brackets and thus the average tax rate rises. Spending will, however, reach 26.5 percent of national economic output on current policies. (Those are Riedl’s calculations, based on Congressional Budget Office numbers.)

Conservatives use that historical record to argue that the deficit is entirely the result of excessive spending and not at all the result of insufficient taxation. It’s a fair point, and a useful corrective to such inanities as you will find in Newsweek (where Andrew Romano writes, “There isn’t much left to cut” in the federal budget). But the argument can take conservatives only so far. The per capita cost of health care is also growing far beyond its historical average, as is the median age of Americans. We can keep the level of taxation we have had for the last few decades, or close to it, only if we change the way we have run our programs for the elderly for the last few decades. But even many of the tea partiers who say they don’t trust Republicans on spending would balk at changes to Social Security and Medicare.

“Republicans should be talking more about entitlements going into the election even though there’s a risk,” says Chris Papagianis of e21, a new conservative economic think tank, although he concedes that Republicans may want to seek immediate savings in other parts of the budget before shooting for long-term savings. But eventually we will have to reform entitlements, raise taxes, or both. “I’ve been in so many fights with the appropriators,” says Representative Ryan. “But it’s entitlements that are going to kill us.”

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