Thursday, October 27, 2005In today's op-ed, the overrated David Broder argues that the country needs a more sensible fiscal policy. Fair enough. Unfortunately his description of a sensible fiscal policy amounts to drinking the kool-aid:
At a panel headed by the DLC's chairman, Iowa Gov. Tom Vilsack, the answer that emerged was: Strike a bipartisan bargain that would involve some short-term tax increases in return for long-term savings on entitlement programs and improvements in the administration of government.
This is a compromise? This is a sane fiscal plan? Long-term cuts and short-term tax increases? I'm afraid Mr. Broder simply hasn't taken the time to examine the facts. The major cause of the deficit is not overspending but the gaping whole in the tax base. The federal government today spends 25% of GDP, a figure which has remained fairly constant for decades. When you look at tax revenue, however, it has decline from a quarter of GDP to a fifth. This is what people call a structural fiscal gap. If Bush hadn't cut taxes on the wealthiest 10% of people, we wouldn't have such a deficit problem. Now I'm a reasonable person. I can accept reductions in spending. But how about we have increase taxes on the people whose incomes are rising and tax burden is falling? And how about we do so permanently? Otherwise we will be having entitlement cuts today and more entitlement cuts tomorrow, when the tax increases expire.
The faulty assumptions of Broder's (and the DLC's) approach is laid out in the next section:
MacGuineas urged the Democrats to begin examining ideas she and others have put forward that would not simply reduce future benefits or postpone the age at which retirees could claim them but would instead adapt the whole social insurance concept of the 1930s to the realities of a new millennium.
Her concepts include mandated programs of individual savings for the predictable expenses of child-rearing, education and retirement; social insurance for the costs of catastrophic but unforeseeable medical bills; and some guarantee of safety-net income for people who, through no fault of their own, lose jobs or retirement benefits because of broad economic changes.
This is just a reformulation of the so-called "opportunity society," the main message of which is that we are all in this alone. This agenda would in effect shift the burden of paying for the tax cuts (on the wealthy) onto the backs of the poor and middle class. Broder's suggestions don't amount to social insurance at all, but individual insurance. It would completely shred the social safety net. If we accept these proposals, it will justify the whole "starve the beast" strategy of cutting taxes and forcing cuts in social welfare. We will have handed Grover Norquist his victory: the New Deal will be repealed, and we can now drown the government in the bathtub.
Broder is supposed to be a smart guy, isn't he?