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Tuesday, September 25, 2007
Renewing Fiscal Responsibility
The Brookings Institution will be hosting an event to get the presidential candidates focused on the deficit. But only six years post-Clinton, they may be tilting at windmills.
A quick look at the web sites for the top three Democratic candidates for president reveals not a thing about their views on governmental borrowing. None of them list "fiscal responsibility" or any of its variation as a high priority issue. Most telling was Sen. Barak Obama's (D-IL) recent speech laying out his tax policy platform, in which not a cent would be devoted to deficit reduction (and the Brookings Institution hosted the speech!). Meanwhile, Republican candidates are fixated more on fiscal "discipline" than responsibility- another way of proposing to cut spending a little and give out monster tax breaks.
All the Democratic candidates support PAYGO. But I see no evidence that any candidate has paid a price for their inattention to deficit reduction. Deficits, per se, just don't seem to matter much to the public. This is somewhat unfortunate, because the $3 trillion run up in the debt is a big deal, and the public needs to know more about it.
Here's what I propose: Fiscal responsibility-ists could get the public's attention by talking about the spending projects that account for the debt increase. Unlike deficit reduction, they happen to be high profile issues. For example:
- The war in Iraq is unpopular, important and entirely deficit-financed. We all will be paying for it through payments on the debt. Most likely, the debt payments will be paid for through more taxes, spending cuts or spending foregone. Combined, they will be relatively more regressive than if taxes had been increased on the wealthy. This may get people who are concerned about the war interested in the debt.
- I imagine the public does not know that the tax cuts will have to be paid for because they were deficit-financed. The Brookings/Urban Tax Policy Center (and...yes the Hamilton Project) has documented that the tax cuts will reduce incomes for over three-fourths of the public. You know why you didn't know that? Because borrowing conceals who really pays the bills. We all pay for the tax cuts, through payments on the debt. Those who object to the regressivity or ineffectiveness of the tax cuts may then get interested in the debt.
Bottom line: the debt is important mostly because it shows that the Bush Administration and the Republican Congress's many costly policies were not a free lunch. The public ought to be educated about the impact of these policies, and who was responsible for them. Fiscal responsibility-ists are the people to teach them.
But the time when the public believed debt is important mostly because of its inherent harmfulness is over.
Update: See this Watcher article for more
Posted by Matt Lewis
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