The Freeze Part 2
No I haven’t changed the basic thrust of my opinion: the freeze still is rubbish. It covers a small part of the budget and so will garner very little by way of actual deficit reduction. At the same time it represents an abject capitulation by the White House to Republican arguments. At best it panders to populist emotions about government profligacy in the face of private penury.
And we all know how wrong that is.
Ezra Klein absolutely nails the capitulation issue. Obama has tossed overboard one of his better arguments: health care reform was our best and brightest shot at cutting the deficit. The problem became that the GOP was successful in getting the public think of reform as a new, and costly, government program, which it isn’t. Obama conspicuously failed to get his message across: his view of reform was that of cost control rather than of entitlement extension.
Come to think of it I doubt he really tried.
In the longer term, after the effects of the crisis have abated, the basic deficit questions can be resolved down to these:
- Revenues have been slashed by the Bush tax cuts of 2001 and 2003 without resulting in an offsetting boost to GDP growth. Greg Mankiw tried to explain them as Keynsian deficit spending, but he absolutely failed to make the case. Instead the loss in revenue has plunged us into red ink on a permanent basis : this is the structural problem we need to fix.
- Entitlements are too expensive. The really big issue is health care. We cannot keep Medicare funded the way it is now. It will bankrupt us. It needs modification. Bush added vast costs and blocked the implementation of efficiencies. The current health care reform fixes those errors and more.
- In contrast Social Security is relatively easy to fix: raise the retirement age to reflect modern demographic realities; and eliminate the ceiling on social security taxation. Along with minor tweaks these solve any cash problems the program has.
- Defense spending is way too high. We are conducting wars hither and yon, without any limit in time or extent. Frankly we cannot afford to anymore. We need to modernize and reduce the military: one attractive plan is to eliminate the air force as a separate entity and spread its functions into the army and navy. The savings would be enormous.
- Our debt levels expose us to much higher interest costs if rates jump at some future date. Right now we are lucky rates are historically low. That luck could run out at any time.
Fixing all these problems would not be easy at the best of times. In the context of a fractured and recalcitrant Senate hell bent on obstruction it seems impossible without strong White House advocacy and leadership. Which we do not have.
By capitulating to the 41 GOP senators who, for some reason, put the fear of god into him, Obama has adopted their agenda in a craven attempt at electoral survival. He has put survival ahead of principal. He now stands for nothing other than winning elections, and so prolongs rather than changes the course of the Reagan/Bush trajectory – which would be great if that trajectory led somewhere other than deeper into debt.
The implication is that, instead of making fundamental shifts in spending on entitlements and defense, we will focus simply on tax and spending cuts only. Defense will be ruled off limits. Intelligent cost reduction of health care will give way to the reduction of benefits and the reduction of entitlements rather than the enforcement of cost control.
The change we can believe in is long forgotten.
