Undoubtedly, this is the fault of both parties, and I’ve even go so far as to say the Republicans deserve more of the blame (but that could change in a minute).
For years, Republicans operated without a care as to deficit spending. Under their near-mustical belief in the supply-side magic of “starve the beast”, the thinking was that as long as we were cutting taxes, the tax cuts paid for themselves (via enhanced economic growth which produced enhanced revenue), so deficits were not a concern, and “starving” the government (by not providing the revenue to pay for government spending) would shrink it.
So, for quite some time, Republicans haven’t been fiscal conservatives. Deficits were fine, even desirable when the GOP could use enhanced spending as a political tool to gain votes (i.e., Medicare Part D).
This, of course, left the door wide-open for the Democrats, who decided that once they achieved a true majority (including the WH), they’d engage in cramdown bill passage and never have to justify paying for the massive expansion of the entitlement state.
One of the main constraints, you see, holding back this expansion was always an common sense argument that in order to pay for it, we’d have to have massive tax increases, and these ideas were DOA because there’d be no way the citizenry would foot the bill for them.
Thanks in no small part to the GOP - who adopted wholesale a fiscal philosophy where taxation and spending somehow have no connection to one another - the Democrats could now use their own game against them, pass massive expansionary bills with borrowed money, and never have to answer how they’d pay for it.
Then, when the bills starting coming due and people began fretting about the yawning size of the deficit, the Democrats - with the bills already made law - can now demand that we pay for programs. As such, the Democrats adopted what some have called “gorging the beast” - growing the entitlement state and then demanding that taxes increase to pay the bill.
The GOP has no one to blame but itself.
As for the solution, the best thing I’ve seen is the Bowles-Simpson approach (but I would be more aggressive with cutting spending). I don’t like tax increases generally, but we are at a seminal moment in our history where tax increases may be required to teach a valuable lesson:
[i]But hereÃ?Â¢??s the case: one problem with our current tax policy is that at the moment the American people as a whole are receiving a dollar of government for the price of only 60 cents. (I donÃ?Â¢??t say a Ã?Â¢??dollarÃ?Â¢??s worth of government,Ã?Â¢?? but letÃ?Â¢??s leave that snark for another time.) Any time you can get a dollar of something at a 40 percent discount, you are going to demand more of it. My theory is simple: if the broad middle class of Americans are made to pay for all of the government they get, they may well start to demand less of it, quickly.
ThereÃ?Â¢??s corollary point to this. Back in the Reagan years, there was a vigorous internal debate about whether to resist tax increases because Ã?Â¢??starving the beastÃ?Â¢?? would hold down spending. But evidence is now in: this strategy doesnÃ?Â¢??t work. My witness on this point is the Cato InstituteÃ?Â¢??s chairman, William Niskanen (who was chairman of ReaganÃ?Â¢??s Council of Economic Advisers at one point, and a person whose libertarian credentials are hard to beat). Niskanen noted this striking finding in a Cato Policy Report a while ago:
In a professional paper published in 2002, I presented evidence that the relative level of federal spending over the period 1981 through 2000 was coincident with the relative level of the federal tax burden in the opposite direction; in other words, there was a strong negative relation between the relative level of federal spending and tax revenues. Controlling for the unemployment rate, federal spending increased by about one-half percent of GDP for each one percentage point decline in the relative level of federal tax revenues. . . One implication of this relation is that a tax increase may be the most effective policy to reduce the relative level of federal spending.
Other economists have reached the same conclusion. In other words, if you want to limit government spending, instead of starving the beast, serve the check. (Well, I can hear everyone now, thereÃ?Â¢??s goes your invitation to Grover NorquistÃ?Â¢??s Wednesday meetings! True that.) Right now the anti-tax bias of the right has the effect of shifting costs onto future generations who do not vote in todayÃ?Â¢??s elections, and enables liberals to defend against spending restraints very cheaply. Time to end the free ride.[/i]
Excellent post. “Starve the beast” hasn’t worked. Even today, there’s no real climate open to meaningfully deep cuts and reform. It’s time for the GoP to support tax raises. There is nothing more conservative, more traditional, than “if you insist, then you will pay for it.” Once the bill hits, once Americans realize just how expensive and consuming their government has becomes, maybe attitudes will finally change. Right now though, there’s no reason to change. They get their services, paying piddly squat to nothing (relative to the real cost). The bulk of the bill for it all shuffled off to Americans not even born yet. And no, hikes on only the wealthy won’t cover it. It’s that massive of a problem. Tax hikes could harm what might be a fragile economy for some time? That might be exactly the wake up call Americans would need.