Wednesday, March 16, 2005

Delta Deficit Equals Zero

One of Bush's greatest achievements has been his ability to be all things to all people, especially with respect to fiscal policy. Somewhere along the line he realized (or, more accurately, Karl Rove realized) that fiscal conservatism presented certain electoral challenges that were difficult to resolve. True, everyone likes tax cuts, but benefit cuts are a more difficult sell -- especially when you are talking to the beneficiary. When it comes right down to it, most of us like the services provided to us by government and when someone starts talking about eliminating them, we start to get antsy.

So what's a fiscal conservative to do? After all, since the name of the game is reducing the size of government, tax cuts are only half the battle. Moreover, it would be outrageously irresponsible to reduce revenues without reducing expenditures. I mean, that's madness.

But, of course, great thinkers are never limited by such pedantic restraints, and Karl Rove (let's be honest about who we're talking about here) is no exception. His master stroke was realizing that maintaining power was more important than sound fiscal policy. Why not lower taxes AND increase benefits? That way everyone's happy (except for a few economists pulling out their hair on the sidelines -- but really, how large a constituency is that?). It may create crippling deficits, but those effects will be faced long after this administration has retired to Crawford. Moreover, those deficits might finally create enough political will to truly eviscerate the welfare state. Thus, the benefits of this strategy pay dividends both in short-term electoral victories and long-term ideological goals. Talk about win-win…

Clearly, defending against this tax-cut/spend strategy is quite difficult for responsible Democrats. This is especially true when you consider how willing people are to swallow something-for-nothing rhetoric when it is presented by someone with such down-home charisma. How do you get people to recognize the looming disaster with the assurances of Mr. Sunshine in the air? And if they can't see it coming, how do we avoid it?

As it turns out, there may be an answer. Mark Schmitt over at The Decemberist has a post up about PAYGO that seems to have promise. The basic idea is that you require budgetary changes to have a net zero effect on the deficit. Want to increase benefits/expenditures? Fine, but they have to be offset with tax increases rather than borrowing. Want tax cuts? Same deal. Cut expenditures. No borrowing.

Politically, this is a great issue for Democrats to take on. Since matching income and expenditures is something that everyone deals with in their own lives, it's easy to understand. Frankly, most people never quite get how the government avoids facing this reality when the rest of us have to. Plus, it forces Republicans to put up or shut up about fiscal responsibility. If they reject it, it becomes a potential campaign issue in 2006.

On the other hand, if it passes, the administration is finally forced to pick a side. Are they big spenders or big tax cutters? No longer can they be both. And if they remain ideologically pure with respect to tax cuts, people will finally understand what is being asked of them? Mark boils all this down quite succinctly.
A few weeks ago, in writing about Goldwater, I noted that the genius of Rove and his followers was that they had figured out how to separate the ideological conservatism that Americans liked from the operational conservatism -- the real cuts in government -- that Americans did not. PAYGO rules are a way of forcing those two back together. If Republicans are serious about cutting taxes and making government smaller, they must be willing to come forward simultaneously with the cuts they are willing to make and bear the consequences. Or, if they do not want to make cuts but still want to cut taxes for the top 0.2% of the population, they must be willing to say whose taxes they are willing to raise to pay for those cuts.
Passing PAYGO could go a long way to bring honesty back to federal fiscal policy. No longer could Bush use absurd accounting techniques to conceal the outrageous damage being done to our economic future. No longer could he be all things to all people. Most importantly, people might begin to understand what they're really voting for. If people really don't want government services, I can live with that. But right now the electorate is pulling levers in fantasyland. And once that starts happening, is it even a democracy anymore?

Anyway -- I'm just getting into this, so I don't know how viable it really is. But initially, it looks good. I, for one, will be keeping an eye on it. You should, too.
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