One Thing Romney and Obama Agree On

Big Government

By Brendan Greeley 

 “We need to stop spending money we don’t have,” said Paul Ryan at the Iowa State Fair on Monday. “President Obama has given us four years of trillion dollar-plus deficits. He is making matters worse, and he is spending our children into a diminished future.”

It’s a slippery word, “spending.” As Paul Ryan understands it—as do almost all of the Republicans in office—”spending” means writing a check. The federal government takes in money through taxes, then spends it on programs. This makes intuitive sense. It’s also wrong.

It’s been wrong since 2002, when the United States, after a one-year dip into the black, began running deficits again. You might argue that the Bush tax cuts, extended by the Obama administration, caused these deficits. Or that the wars in Iraq and Afghanistan did, or Medicare Part D, or reduced revenue from the dot-com bust or the Great Recession, or Barack Obama’s check-writing and tax-cutting stimulus passed in 2009. You would be right about all of these things. Once in deficit, if the federal government takes in less money, it makes up the difference by borrowing money. If it writes bigger checks, it does the same. Until the budget is balanced, it’s all Treasury bills. It’s all spending.

In 2012, the United States is at the end of a decade-long experiment in borrowing money to push into the economy. Now each candidate for president would like for us to believe that he is going to put an end to this profligacy. We are told that this election presents voters with a stark choice between two very different visions of government: one that is active on behalf of its citizens, and one that gets out of the way. That’s true. Yet neither offers a credible way to stop borrowing money to pay for what he wants to do.

Instead, voters must choose between a Democrat with a detailed budget plan that can’t pass in Congress—and doesn’t really attempt to unwind the spending—and a Republican challenger with a budget plan that lacks details, can’t pass in Congress, and unwinds the spending with magic. Both candidates fear the public will punish anyone who takes away what has been given so freely for the last 10 years. Obama addresses this by not doing it. A best guess at Mitt Romney’s and Paul Ryan’s budgets shows that they will address this by pretending to do it. Both would have us continue to amass debt to enact their ideas of what the economy needs—tax cuts or investment. In that way, our stark choice is really between two different versions of large government.

Obama claims to care about the deficit. In his budget this year, he takes credit for offering a comprehensive spending-reduction deal to congressional Republicans in 2011. He does not repeat the offer. Instead, he presents in exhaustive detail a budget that, according to the Congressional Budget Office, increases debt as a proportion of gross domestic product until 2018, when it flattens out around 76 percent. His budget claims to simplify the tax code. It doesn’t. Rather, it reduces personal deductions and rolls back tax cuts on income above $250,000. It eliminates some corporate deductions and creates others. President Obama, the great taxer, would take in 6 percent less in revenues than current law over the next 10 years. He’s betting that the economy needs investment—spending—now, and that long-term it can tolerate debt at 76 percent of GDP, almost 30 percent higher than before the economy crashed. Obama’s plan doesn’t reduce the debt. But it is an exhaustive, transparent calculation of what he thinks voters can stomach. The Republican House rejected it unanimously. The Senate hasn’t even brought it to the floor.

It’s hard to subject Romney’s and Ryan’s budgets to this much scrutiny. It’s still unclear whether their campaign will adopt Ryan’s vague 2013 Path to Prosperity budget resolution or Mitt Romney’s even vaguer set of budget-like campaign ideas. Both claim they can reduce corporate and personal tax rates dramatically, without losing revenue, by eliminating deductions and loopholes. This sounds a lot like ideas from the Simpson-Bowles commission. But where the Simpson-Bowles report laid out in excruciating detail which loopholes should go, neither Ryan nor Romney will commit to any—save Ryan’s plan to eliminate deductions for alternative-energy companies. As the Congressional Research Service notes, deductions “are broadly used by the public and quite popular.” Details are expensive. Provide them, and you will lose votes and donors. Explicitly rule them out, and you will have to spend more money.

Unlike the Simpson-Bowles commission, neither Romney nor Obama anticipate any changes to Social Security. Ryan’s budget does come up with real, detailed savings by reducing overall Medicare costs and turning the program into a system of premium subsidies. It also reduces the cost to the federal government of Medicaid, turning it into block grants for the states. It reduces fixed payments to farmers. The Path to Prosperity also promises some intriguing bits of honesty in budgeting, such as bringing federal loan guarantees onto the books as a liability.

The rest of Ryan’s savings, however, come from promising to save, forcing Congress into the same kinds of caps and sequestration that both parties are now attempting so furiously to wriggle out of. Ryan’s Path to Prosperity for the 2012 budget year included numbers for each agency by year. The CBO looked through, agency by agency, and scored Ryan’s plan as raising public debt to 70 percent by 2022. This was actually a little worse than if Congress were to do nothing.

For the 2013 budget year, Ryan’s new Path to Prosperity claims to bring the debt down to just 61 percent of GDP by 2022. He did this by getting rid of pages of details, replacing them with a single line of grand totals for government outlays and revenue. And this time, Ryan didn’t ask the CBO for a score. Instead, he requested what’s called a “long-term outlook.” He gave the CBO his budget totals for each year until 2022 without any details of how he came up with them. The CBO then used them to project from 2022 to 2050. This gives the plan the appearance of CBO approval without the inconvenience of the agency conducting a rigorous analysis.

Ryan’s ideas on Medicare and Medicaid, which save real money, are also very unpopular and have passed only in the Republican-led House. The rest of his plan—and Romney’s—consists of a tautology and an evasion. Congress will make cuts because Congress will force itself to make cuts. Taxes will be lower and revenue won’t fall too much, but they can’t tell you how.

There is no mystery, in Washington or anywhere else, about what actually needs to be done to bring government spending under control. One option is to do nothing. In its long-term budget outlook for 2012, the CBO presents a future it calls the “baseline scenario.” This is simply what would happen if Congress passes no new spending bills before January. The Bush tax cuts will expire. Automatic cuts to defense, Medicare, and discretionary spending will go into effect. To a pure deficit hawk, it looks pretty good. According to the CBO, it starts reducing debt as a percentage of GDP in 2016, and by 2022 it’s down to 61 percent (the same target the Ryan plan aims for). But there’s a reason the baseline scenario is often referred to as the “fiscal cliff”: It will limit growth in real GDP next year to half a percent.

This abrupt timeline will be destructive to the economy and terrible for jobs. Yet whether we make them soon or make them later, eventually cuts of this size will be necessary. This is fifth-grade math. No further study is needed. No panel of experts needs to be assembled. The baseline scenario, of course, won’t happen. Both parties are now negotiating under the shared assumption that neither can tolerate it. But as it in fact eliminates spending, it serves as a useful comparison. Any politician trying to sell a plan needs to prove that it’s better than doing nothing.

If the baseline scenario is a cliff, Simpson-Bowles is a glider. It lands gently, but gets to the same place—debt at 61 percent of GDP by 2023. It has the advantage of not coming from the White House, Mitt Romney’s headquarters, or Ryan’s office. It was negotiated by Democrats and Republicans and, conceivably, should stand a chance of passing a Congress and being signed by a president. Yet Obama, who called the commission into existence, stepped away from its recommendations. Ryan, who sat on the commission, refused to endorse its report, helping prevent it from being sent to Congress. Romney says his proposals are similar to the commission’s. He does not share the commission’s love of detail.

In his 2013 budget, Obama points with pride to the “PAYGO” bill he signed into law, which requires revenue increases to offset any new programs and cuts to accompany any revenue losses. The Path to Prosperity proposes “CUTGO,” which would force any new mandatory programs to be accompanied by discretionary cuts elsewhere in the budget. These are fun slogans, but neither spells out a realistic way to actually pay or cut. Very little about our supposedly honest fiscal debate this year bears any resemblance to reality. Despite what the candidates say, the 2012 campaign doesn’t pit two radically different ideas about the size of government against each other. Obama and Romney are arguing about very different visions of how to borrow money, shift it around, and not pay it back.