The Agenda

Charles Blahous on the Fiscal Cliff Negotiations

In a new Economics 21 policy brief, Charles Blahous makes a number of observations about the ongoing fiscal cliff negotiations. The following struck me as particularly noteworthy:

Point #4: Stabilizing spending is the best way to clinch any deal that includes revenue increases. There has been much press coverage of the pressure President Obama is attempting to place on Republicans to raise tax rates. All the pressure in the world, however, does not give conservatives an incentive to support tax increases as long as federal spending continues to rise as a share of the economy. As long as it does, conservatives know that any tax increase must ultimately be followed by another demand for more taxes at a later date. The quickest way to seal a deal with conservatives to raise revenues is to commit to stabilizing federal spending as a percentage of GDP.

Co-chair Erskine Bowles of the Simpson-Bowles commission realized this, which is why its recommendations would have stabilized long-term federal spending levels at 21% of GDP. There is nothing sacred about the historical average of 21%; the key is that spending can’t ultimately grow faster than the underlying economy can support. This week Republicans reiterated their willingness to raise revenues as part of a package that fixes the spending growth problem. Without such a fix, however, conservatives have little reason to agree to a significant tax increase of any amount. [Emphasis added]

I’ve generally been skeptical of an arbitrary GDP spending target, as I worry that it will tend to encourage off-balance-sheet activities. But Blahous makes a a strong case. 

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

Most Popular

Politics & Policy

Demagoguery Is Not Leadership

The government of Prime Minister Jacinda Ardern in New Zealand has, with the support of the opposition, decided to enact fundamental changes in the nation’s firearms laws less than a week after the massacre at two Christchurch mosques. This is the opposite of leadership. It is also an example of why ... Read More
White House

The Media’s Disgrace

There will soon enough be an effort to memory-hole it, but the media coverage of the Russia investigation was abysmal and self-discrediting — obsessive and hysterical, often suggesting that the smoking gun was right around the corner, sometimes supporting its hoped-for result with erroneous, too-good-to-check ... Read More
U.S.

Political Theatrics

EDITOR’S NOTE: The following is Jonah Goldberg’s weekly “news”letter, the G-File. Subscribe here to get the G-File delivered to your inbox on Fridays. Dear Reader (Including all you whippersnappers under the age of 50), I’m writing this from somewhere over the Atlantic. At least I hope that’s ... Read More
Politics & Policy

What Was Trump So Annoyed About?

One of the stranger arguments that I heard throughout the Mueller saga -- and am hearing today, now that it's turned out to be a dud -- is that Donald Trump's irritation with the process was unreasonable and counterproductive. This tweet, from CNN's Chris Cilizza, is a nice illustration of the genre: Donald ... Read More