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Issue No. 80 (December 1, 2005) -- Mark Satin, Editor
To balance the
Over the next few months, tax reform and the balanced budget are going to grab the attention of every caring American:
-- The President’s Advisory Panel on Federal Tax Reform has just issued its recommendations, and they’re not only tepid but they’d make the overall problem worse by further lowering tax rates on families and businesses!
Where is the responsible political leadership we need today? Where are the adults?
It is a question that haunts people of conscience at all points on the political spectrum -- not least of all some of the younger policy analysts in Washington DC.
For example, in a professional tax journal, Maya MacGuineas of the center-left New America Foundation recently had the guts to say we’re facing an “abdication of responsibility by the political class" (ed. note: all sources are in the "RE:SOURCES" section at the end of this article).
And at a New America brownbag lunch event on tax policy last month, Brian Riedl of the conservative Heritage Foundation cried, Lawmakers are in complete denial over what’s going on right now!
Unfortunately, most people on the far left and new right have never cared much about balancing the budget. For them, spending or tax cutting (or both!) is all.
And when the traditional political center has dared to call for fiscal responsibility (as Senator Paul Tsongas famously did in the 1992 presidential primaries), it’s had all the appeal of castor oil.
What makes the radical middle different, and potentially more effective, is that we not only feel, passionately, that a balanced budget matters.
We feel we can only get there by building a better society -- fairer and more sustainable.
The gory facts
It is difficult to overstate how irresponsible our federal budgeting has become.
The spending side is out of control. Most of us don’t realize that U.S. government spending has gone up 33% over the last four years alone (under a supposedly conservative Administration), as you can see from the chart on page three of Brian Riedl’s policy paper.
Even more alarming is that we’re refusing to pay for what we’re spending.
Alice Rivlin and Isabel Sawhill are respected economists who’ve served in high positions in the U.S. government (in addition, Sawhill co-authored one of the first explicitly radical middle policy books, Updating America’s Social Contract, 2000). In a recent report for the blue-chip Brookings Institution, where Rivlin and Sawhill now work, they demonstrated that our budgetary deficit will range from $430 billion to $687 billion every year for the next 10 years! Just look at the chart on page iii of Restoring Fiscal Sanity: Executive Summary.
Why it matters
Not all budget deficits are bad -- some can get us out of recessions. (The radical middle is creative about tax policy, not moralistic.)
But when deficits are as huge and as persistent as the ones projected above, they can only be catastrophic, for the following reasons (all routinely cited by Rivlin & Sawhill, political journalists George Hager & Eric Pianin, and many others):
To take a stand
It is not enough simply to say, “Let’s stop!”
As former Reagan Administration policy analyst Charles Kolb told the New America luncheon, Congress and the Administration “simply cannot help themselves.” There is no sense of national purpose any more, no sense of priorities, not even an honest national debate about what our purposes and priorities should be.
In that context -- our current context in a nutshell -- it is inevitable that everyone will just take what they can and then run. Corporations, the middle class, prosperous seniors -- every interest group is culpable. (Inexorably, the neediest groups remain the least well served, programmatically as well as economically.)
The radical middle has a clear sense of priorities. It would build a society that is above all fair and sustainable.
In the long run, we would achieve those goals and balance the budget by reinventing key institutions. For example, we'd replace the current tax system with either a progressive flat tax or a progressive consumption tax. And we'd introduce universal health care through the private insurance system, with incentives for preventive and alternative care. See Five Books that Would Make a Radical Middle Revolution.
But even in the short run, we have much to bring to the table.
In fact, if you pull together 18 tax-cutting and revenue-raising proposals that radical middle thinkers have been offering lately, you’ll discover we can bring the budget into balance RIGHT NOW.
No castor oil is needed. We can generate an additional $700 billion per year simply by trying to create a fairer and more sustainable society ($475 billion / year from fairness measures #1-10 below, $225 billion / year from sustainability measures #11-18 below).
That’s more than enough to balance the budget each year through 2014, according to the Rivlin-Sawhill projections.
Which means we could begin paying down the national debt, something we surely owe to our children and grandchildren. And we'd have a comfort zone in which to begin the hard work of reinventing our key institutions. . . .
Toward a fair society (total saved or raised: $475 billion / year)
1. Impose a surtax to cover
emergency spending, $80 billion
2. Eliminate the home
mortgage interest deduction, $75 billion
3. Close tax loopholes, $75
4. Means-test entitlement
benefits, $60 billion
5. Increase the upper limit
of earnings subject to the Social Security payroll tax, $58 billion
6. Prevent people from
avoiding taxes on their “Cadillac” health insurance plans, $40 billion
7. Slash corporate welfare,
8. Replace the estate tax
with an inheritance tax, $30 billion
9. Slash pork barrel
spending, $12 billion
10. Calculate cost of
living increases more accurately, $10 billion
Toward a sustainable society (total saved or raised: $225 billion / year)
11. Implement a system of
tradable carbon emission permits, $80 billion
12. Impose a 50 cents per
gallon increase in the gasoline tax, $70 billion
13. Introduce spectrum user
fees, $30 billion
14. Reduce federal aid for
highways, $13 billion
15. Impose additional
cigarette and alcohol taxes, $12 billion
16. Eliminate most
energy-related tax breaks, $10 billion
17. Cap farm subsidies for
wealthy farmers, $10 billion
18. Spend less on
“hard power” and more on “soft power,” no $$ change
Priority #1: attitude change
Alas, it’s not enough to show that our budget MUST and CAN be brought into balance.
We also have to induce most Americans to WANT to make the effort. To choose long-term caring over short-term greed.
A nonpartisan commission might help, and Senator Chuck Hagel’s recently proposed Comprehensive Entitlement Reform Commission could serve as a model. Hagel’s commission would be empowered (even encouraged) to make BOLD recommendations to Congress for changes in the Social Security, Medicare, and Medicaid systems. Even more important, its members would be appointed by bi-partisan leaders of the House and Senate, but they couldn’t be elected officials. See HERE.
The “Exercise in Hard Choices” might also help. It’s a workbook designed by the Committee for a Responsible Federal Budget to educate us about the choices involved in creating a balanced budget -- in part by encouraging us to come up with own own “hard choices.” It’s being used in high schools now, and by some members of Congress in their home districts, and when it goes electronic and interactive (soon) it could reach literally millions of Americans. See HERE.
Most important of all, though, is political leadership.
Leaders can create rapid attitude change, especially in a country as media-wired as this one. But there is remarkably little political leadership so far on the balanced budget issue, and radical middle thinkers and activists are becoming hoarse calling for it.
We have URGENT fiscal choices that we need to make as a country, and they are NOT being addressed!, Charles Kolb told the New America luncheon.
At that same event, Maya MacGuineas put the ball in our court. With no little passion, she called on voters to finally start REWARDING politicians who dare to make the difficult and long-range choices.
Over one million people now hold some sort of elected office in this country. Perhaps you might consider running for office yourself -- and making responsible budget choices your priority issue.
Since responsible budget choices require fairness and sustainability, it might even be a winning issue.
For on-line suggestions on budget balancing that were used in our article above, see Congressional Budget Office, Budget Options (February 2005); J. Bradford DeLong, Brad DeLong’s Semi-Daily Journal, weblog (April 18, 2005, and November 17, 2005); Sandra Fleishman, “Deduction Eruption,” Washington Post (November 12, 2005); Maya MacGuineas and Alicia Cheng, “Closing the Hurricane Gap,” New York Times (October 7, 2005); "Conversations: Maya MacGuineas," Tax Notes (October 24, 2005); President’s Advisory Panel on Federal Tax Reform, Final Report (November 2005); Brian Riedl, "The Five-Step Solution," Backgrounder #1833 (Heritage Foundation, March 16, 2005); and Alice Rivlin & Isabel Sawhill, Restoring Fiscal Sanity 2005 (Brookings Institution, April 2005).
For hard-copy suggestions on budget balancing that were used in our article above, see Lester Brown, “Tools for Restructuring the Economy,” chap. 11 in ibid., Eco-Economy (2001); Maya MacGuineas, “Radical Tax Reform,” chap. 7 in Ted Halstead, ed., The Real State of the Union (2004); and Mark Satin, “To Balance the Budget, Build a Sustainable Society,” chap. 10 in ibid., New Options for America (1991).
For a brief but solid overview of the whole federal budget-making process, see B. Guy Peters, “Budgeting,” chap. 6 in ibid., American Public Policy: Promise and Performance (6th ed., 2003).
For a great introduction to the politics of budget balancing, see George Hager & Eric Pianin, Balancing Act: Washington’s Troubled Path to a Balanced Budget (1998 ed.). For a history of budget balancing from colonial times to the near-present, see John Makin & Norman Ornstein, Debt and Taxes: How America Got into Its Budget Mess and What to Do About It (1994).
Other U.S. “better budget” groups include Center on Budget and Policy Priorities, Centrists.Org, Committee for a Responsible Federal Budget, Committee for Economic Development, Concord Coalition, and Tax Policy Center.
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