Stockman Takes Washington to Woodshed

David Stockman, the Reagan OMB Director, wrote a column for the New York Times over the weekend in which he plainly lays out the games that are being played by Dems and Repubs on solving the budget deficit. He takes to task Republicans for their insistence on cutting taxes while professing to want to “cut the deficit”.

Ingratiating himself with the neo-cons, Mr. Ryan has put the $700 billion defense and security budget off limits; and caving to pusillanimous Republican politicians, he also exempts $17 trillion of Social Security and Medicare spending over the next decade. What is left, then, is $7 trillion in baseline spending for Medicaid and the social safety net — to which Mr. Ryan applies a meat cleaver, reducing outlays by $1.5 trillion, or 20 percent.

Trapped between the religion of low taxes and the reality of huge deficits, the Ryan plan appears to be an attack on the poor in order to coddle the rich. To the Democrats’ invitation to class war, the Republicans have seemingly sent an R.S.V.P.

He does not spare President Obama:

The latest iteration of the Obama plan is little better. By 2014, it would generate $70 billion from taxing the rich and perhaps $30 billion from the president’s belated call to re-examine our over-financed military but virtually nothing from freezes on domestic programs or from Medicare reimbursement reforms.

So Stockman points out that once again, if Paul Ryan is trying to be “America’s accountant” he needs a new set of numbers. President Obama’s plans, whatever they might be in the specific, spare the draconian cuts imposed by Ryan but do not in any meaningful way address the deficit.

Nevertheless, the Democrats are immobilized because Keynesians insist on kicking the budgetary can down the road until cyclical “demand” has in their estimation fully recovered, while Republicans sit on their hands because supply-siders insist on letting the deficit fester until tax cuts work their alleged revenue magic.

Yes a swipe at Krugman, who insists deficits are fine until “demand” grows, and at all Republicans who are selling budgetary voodoo. Stockman nails it pretty cleanly, in my opinion, showing that if deficit reduction is your goal then neither Party has delivered anything of note.

But Krugman today delivers his prescription, which involves less cutting, and more taxing. He talks about the Progressive Caucus budget proposal:

True, it increases revenue partly by imposing substantially higher taxes on the wealthy, which is popular everywhere except inside the Beltway. But it also calls for a rise in the Social Security cap, significantly raising taxes on around 6 percent of workers. And, by rescinding many of the Bush tax cuts, not just those affecting top incomes, it would modestly raise taxes even on middle-income families.

All of this, combined with spending cuts mostly focused on defense, is projected to yield a balanced budget by 2021. And the proposal achieves this without dismantling the legacy of the New Deal, which gave us Social Security, and the Great Society, which gave us Medicare and Medicaid.

Krugman notes that he doesn’t expect this to pass, but neither does he expect the Ryan proposal to pass. It comes down to choices which are going to cause pain for somebody. But as Stockman points out politicians in Washington abhor hard choices.

This has instilled a terrible budgetary habit whereby politicians continuously duck concrete but politically painful near-term savings in favor of gimmicks like freezes, caps and block grants that push purely paper cuts into the distant, foggy future. Mr. Ryan’s plan gets to a balanced budget in the fiscal afterlife (i.e., the 2030s); the White House’s tactic of accumulating small-fry deficit cuts over the enormous span of 12 years amounts to the same dodge.

I do believe that the ability to kick the can down the road has ended, and that we must adopt sensible, balanced measures that will actually deal with the deficit. With the tenor of today’s debate that does not seem likely to happen.

Read the Congressional Progressive Caucus budget here.

Read the Stockman column here.

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2 Responses to Stockman Takes Washington to Woodshed

  1. Jules Gordon says:

    Your Honor,

    Some thoughts.

    Inflation under way.
    GDP growth an anemic 1.8%
    Walmart claims their customers are running out of cash
    US credit in the toilet
    Gold climbing out of sight.

    You are right back with Republican insults “Neocons”

    Class and racial warfare is an Obama thing.

    Regan cut taxes to repair 40 years of Democratic spending. Years of prosperity followed.

    Republicans addressed the issue in their campaign and the work being done in the house.

    More than the Dems ever did.

    Jules

    Like

  2. Bill Manzi says:

    Jules,

    Reagan used Keynesian tactics to spur growth. He lifted defense spending without taxing for it, and ran HUGE federal budget deficits. Reagan simply ignored federal deficits. It took Bill Clinton to restore the United States to budget balance.

    Bill

    Like

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