The Agenda

Bruce Bartlett and Josh Barro on How to Think About the Fiscal Future

Bruce Bartlett has a very dark perspective on the fiscal future of the United States, and he sees conservative Republicans as a central, if not the central, driving force behind exploding public debt levels. In an interview with The Economist’s Democracy in America blog, he advances a number of interesting arguments. I take strong exception to many of Bartlett’s arguments and to his tone, which veers dangerously close to contemptuous. Yet his arguments merit attention precisely because the resonate with received wisdom. Bartlett writes:

 

The Republicans don’t have any credibility whatsoever. They squandered whatever they had when they enacted a massive UNFUNDED expansion of Medicare in 2003. Yet they had the nerve to complain about Obama’s health plan, WHICH WAS FULLY PAID FOR according to the Congressional Budget Office. The word “chutzpah” is insufficient to describe how utterly indefensible the Republican position is, intellectually.

One wonders about the implications of this: is it sensible to argue that congressional Republicans should not have criticized the president’s health reform effort because many had voted for the Medicare prescription drug benefit? Given that the CBO process is a decidedly imperfect as a way to gauge the real-world impact of legislation that has broader macroeconomic effects — as CBO analysts would readily acknowledge — it seems odd to suggest that sustained criticism was “indefensible” on grounds of hypocrisy I have no interest in whether or not members of Congress are hypocrites. My operating assumption is that very few elected officials are terribly bright, and politics as a profession seems perfectly designed to attract power-hungry narcissists.

Yet if some congressional Republicans proved willing to criticize deeply flawed legislation that commits the federal government to sharp spending increases, and to sharp tax increases (deficit-neutral!), that is a good rather than a bad thing, regardless of their intentions, which are ultimately unknowable. And when they advance unwise legislation in some other context, it is our collective job to punish them for it. One could argue that the repudiation of congressional Republicans in 2006 and 2008 represented democracy at its best, and that a massive electoral setback of congressional Democrats in 2010 would similarly serve as a warning against overreach. It helps to have low expectations.  

Moreover, the Medicare Modernization Act did have a number of virtues, as did PPACA. The moralistic framework Bartlett advances makes for appealing narrative, but it doesn’t strike me as analytically useful. 

Furthermore, Republicans have a completely indefensible position on taxes. In their view, deficits cannot arise from tax cuts. No matter how much taxes are cut, no matter how low revenues go as a share of GDP, tax cuts are never a cause of deficits; they result ONLY AND EXCLUSIVELY from spending—and never from spending put in place by Republicans, such as Medicare Part D, TARP, two unfunded wars, bridges to nowhere, etc—but ONLY from Democratic efforts to stimulate growth, help the unemployed, provide health insurance for those without it, etc.

My sense is that congressional Republicans would acknowledge that Bartlett’s point is trivially true. It is a mathematical truism that we can indeed raise taxes to historically high share of GDP to close the deficit. It’s just that some of us see this as undesirable. Like Bartlett, I believe that we should be open to increasing the tax burden as part of a broader strategy of managing the public debt explosion, for reasons I’ll elaborate on in another post. Yet I worry about the political economy effects of a lack of spending discipline. The real disagreement is on what constitutes an appropriate tax burden. And given the likely impact of a heavier tax burden, it’s not obvious to me that it is hysterical or deranged or deeply irresponsible to believe that spending discipline is the highest priority. 

The monumental hypocrisy of the Republican Party is something amazing to behold. And their dimwitted accomplices in the tea-party movement are not much better. They know that Republicans, far more than Democrats, are responsible for our fiscal mess, but they won’t say so.

My central disagreement with Bartlett is that I don’t think it’s very sensible to interpret political history as a series of psychodramas. One could present the same facts in a very different matter, e.g., noble congressional Republicans only passed the Medicare prescription drug benefit because they feared demagogic attacks from the left, which threatened a massive political defeat that would impair their ability to pursue pro-growth policies. This is a specious and self-serving narrative. But is it any less specious and self-serving than congressional Democrats who blame demagogic attacks from the right for their own failures on the fiscal policy front? For those who believe that we need to sharply increase taxes on middle income households, this view is a commonplace. Democrats would take precisely this step, the narrative goes, if only they didn’t have to fear ferocious attacks from the Republican spin machine.

Because Bartlett is a public intellectual who intends to persuade others, it’s worth asking about the effectiveness of his rhetorical strategy, e.g., referring to Tea Party activists as “dimwitted.” I’ve met a wide spectrum of people who identify with the Tea Party movement, and I can’t say I’ve met anyone I would describe as “dimwitted.” As I understand it, the basic goal of the Tea Party movement is to restrain the growth of government. Yuval Levin has characteristically valuable thoughts on the subject:

What I mean by justified populist fervour is that what we’re seeing is a reaction to an extension and growth of the welfare state, that to my mind is justified. The question is what form will it take in response, what alternatives can it offer? That’s a place where conservatives can look to Burke, and Hayek to some extent. The answer is not obvious. It’s not clear what opposition to Obama’s policies has to amount to. I do think there is a place for resistance, a place for standing against the expansion of the welfare state and making a case for moving in a different direction.

I do think we should demand more of self-described conservatives in Congress, many of whom really have advanced an unrealistic and unsustainable approach to federal spending.  

But these matters of tone are ultimately not as important as some broader misconceptions, e.g.:

Eventually, American conservatives need to make the deal that European conservatives made after the war: liberals basically spend the money—subject, roughly, to a balanced-budget constraint—and conservatives raise the money in ways that don’t overly burden capital. This means that conservatives have to accept the welfare state and liberals have to give up redistribution on the tax side. But we are a long ways away from such a deal even being discussed.

Josh Barro shared some thoughts on this passage that I will pass along to you:

I have two problems with this statement. One is that I think he’s misdescribing the history; like America, Europe went overboard on tax progressivity in the postwar era. Income taxes in the UK topped out at 95% in the 1960s, as highlighted in the Beatles’ song Taxman. Europe’s shift toward greater tax regressivity came later, starting in the 1970s, on basically the same pace as American cutting of top tax rates.

The second is that, even if Republicans admit that federal revenues at 15% of GDP are undesirable, there is still a policy debate to be had regarding the size of government. Paul Ryan has essentially set the lower bound with his Roadmap plan, which is based on revenues at 19% of GDP, but requires steep cuts in Medicare and Social Security. You could envision a variety of alternative plans at 21%, 24%, etc., including higher tax rates and a more generous safety net.

Any of these plans would “work”, in that the debt load would be made sustainable and the American economy wouldn’t collapse. We need to choose among them. It’s not just some binary question about whether we’re going to be like Europe or not, and there’s no reason to think it involves abdicating decisions about what government should do to the Left. (Indeed, that Bartlett claim is also ahistorical: the Right in Europe has succeeded in many places, including the UK and Germany, at paring back the welfare state to some extent.)

The notion that it is impossible to reduce the spending burden strikes me as wrongheaded, and, as Josh underlines, there is no binary choice between accepting the welfare state and rejecting it, as congressional conservatives implicitly acknowledge when they celebrate the virtues of Social Security and Medicare. What we need is more policy rigor from self-described conservatives, and it’s not clear that scorched-earth rhetoric, from either side of this internecine dispute, will help get us there.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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