The Twisting Debt Ideology
Posted on Jul 12 2011 at 03:54:12 PM in Democratic
Cutting spending and reducing Federal deficits do not necessarily complement one another. If you cut enough, you'll reduce your tax revenues. If these are larger than the reduced spending, revenue falls-- and if cuts are done the wrong way, there is the possibility of permanently lowering revenue. I hate to pile on Fox News, but a spending problem" approach is really causing ideological headaches. The headline reads "Obama Won't Let Go of $4T Deficit Plan."
What's missing? The simple information that Obama wants to reduce the deficit more than the Republicans do. Instead he has a "debt plan," which is obviously misleading because its a plan to reduce debt. He wants to include revenue increases, so it's a bad plan. And he "won't let go," like he's a kid who struck out looking and thinks the umpire made a bad call. So now Fox News is calling for less deficit reduction, after spending the last two years featuring pundits consistently saying we're living in the end times because we've got a lot of debt. Huh?
The ideological shift from "deficit reduction" to "preserve the tax code" is marked. I suspect that the latter was always the stronger tenet of belief, but this discrete shift seems like proof. If this is a consistent line going forward from conservatives, budget problems are going to be much more difficult to solve. I don't know if anyone really expected the Republicans to stick to an absolutist view of no new taxes (defined not as raising tax rates, but as simply raising more revenue through closing loopholes or letting tax expenditures expire). But they have. And it's got me worried, because without essentially undoing the entire welfare/government-funded research system, it would be almost impossible to manage deficits. Further, the no-new-revenue approach assumes that government programs are entirely useless and that every private sector dollar is something akin to magic. Yet it was concentrated private money spent badly that caused the financial crisis (with government help underwriting elements of that debt).
I suspect that the debt-ceiling-raising act will be passed by a bipartisan vote with a lot of split in both parties. If the negotiations are in the kind of shape that the papers say they are, then we might be in for a last-minute affair with Timothy Geithner calling our largest creditors and frantically asking them to give us a few days leeway while both parties play to their bases. As I wrote aboutthree weeks ago, it's frustrating that these potentially long-term changes aren't being discussed in the open-- and with damage minimization openly a priority for Republicans, I can't help but wonder if both parties aren't just trying to figure out a way to do an equal amount of political damage to everybody so no one really "loses." Except those using services that get cut, of course.