Follow the Yellow Brick Road

We at CRFB believe in the Wizard of Oz theory of deficit reduction. Passing the right package of spending cuts and tax increases requires a brain – so that we stabilize our debt in the most economically efficient way; a heart – so that we are focused on the real human consequences of our decisions; and most importantly, courage (“the nerve”).

We have little hope of avoiding a fiscal crisis without politicians who are willing to take political risks, buck special interests, and stand up to members of their own party. The politics of deficit reduction are just too difficult without this courage and leadership.

Fortunately, such politicians do exist. Last week, Third Way hosted an event called “Red Tide Rising: Confronting the Fiscal Crisis” with Congressman Jim Cooper (D-TN), Senator George Voinovich (R-OH), and Senator Kent Conrad (D-ND). None were cowardly Lions.

Senator Voinovich heavily criticized the tax orthodoxy of his own party. “I think that a lot of my colleagues have taken the [no new taxes] pledge,” he explained. “What they have to understand is that that pledge is inconsistent with the oath of office that they took when they became members of the United States Senate.” The Senator argued that we will in fact need both tax increases and spending cuts – and not just from those making over $250,000 a year, but from everyone.

If members of Congress wants to fix the budget mess with spending cuts alone, that’s a fair position – but they need to demonstrate how and not take taxes off the table until we’ve enacted sufficient spending cuts. (Our readers can try themselves through our new debt simulator).

Unfortunately, very few Republican members actually have a plan to improve the long-term budget situation without any tax increases, Paul Ryan being a notable exception. Until they do, we need more Members like Voinovich who are really willing to consider all options.

And we also need more politicians like Kent Conrad and Jim Cooper. “I have had leaders of my party tell me they do not believe we need to touch Social Security or Medicare,” Kent Conrad explained. “Well, you know, that’s just not real. That is just not reality…those who say we don’t have to do anything, they aren’t being square with people.”

If the no new taxes pledge makes stabilizing the debt an incredible challenge, the no entitlement reform pledge makes it impossible. Taxes can’t rise fast enough to keep up with the rapid growth of Social Security, Medicare, and Medicaid. By about 2050 these three programs alone will consume more than what we have historically collected in revenues.

And by the way, discretionary spending cuts and controls will have to play an important part in deficit reduction too – including defense cuts. There may have been a time when certain pieces of the budget could have been protected, but the situation has deteriorated significantly since then, and we certainly aren’t in Kansas anymore. As Jim Cooper explained, “the most important point is that we have to be able to do whatever it takes to save the country. You’ve got to put the country first, and too many people are in denial…Nothing should be off the table.”

All three members agreed with this point, and that a starting point would be to actually pay for new legislation. Senator Voinovich agreed with CRFB’s assessment that the current PAYGO law is like quitting drinking except for beer and hard liquor (the law which actually passed is somewhat more strict than the one we criticized, so perhaps only beer is exempt in this latest version). Senator Conrad agreed with our suggestion that the latest jobs legislation be offset in the out years, so that the bill both stimulates the economy and avoids adding to the debt. And Congressman Cooper made a number of tangible suggestions as to how we can reduce the deficit right now.

But what if these policies aren’t popular? What if voters punish policy makers for raising their taxes and cutting their benefits? (Never mind that these changes will help us avoid fiscal catastrophe).

As Senator Conrad explained, “some of us may pay with our political lives... that’s the way it is. It has to be done. And if that means some of us lose elections, it has to be done.” He’s right. We can’t just click our ruby slippers together and hope this problem goes away – it won’t.