THIS STORY HAS BEEN FORMATTED FOR EASY PRINTING
Scot Lehigh

The budget battle reality check

(Istockphoto/Globe Staff)
By Scot Lehigh
April 8, 2011

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IT’S A sorry spectacle, the long-term budget debate. So far, it pits congressional Republicans trying to mislead the country against a Democratic president who, on this matter, really hasn’t led at all.

If the federal government does shut down because the two sides can’t bridge their differences in this year’s spending plan, that will be a triumph of purblind politics.

But regardless of what happens on that front, the real issue is not the current spending, but rather the further-in-the-future fiscal outlook — and neither side is leveling with the American people.

Let’s start with the Republicans, since they are the worse offenders. Under the false flag of fiscal necessity, House Republicans are launching an ideological assault on Medicare, Medicaid, and other programs. Listening to them, you’d never know there was a connection between our long-term deficit and the 2001 and 2003 tax cuts. Instead, the GOP mantra is we’re suffering from a spending problem, not a revenue problem.

That’s highly disingenuous. Yes, spending commitments — commitments aggravated by the wave of beginning-to-retire boomers — are a large part of the problem. But to ignore the effect of the Bush-era tax cuts is to don a set of ideological blinders. You can’t reduce revenues by some $4 trillion over 10 years without acutely worsening the long-term budgetary imbalance.

That’s not a political statement. It’s a fiscal fact. And yet, House Republicans and their allies continue to ignore that reality. Why? Because only by maintaining that ours is simply a spending problem can they justify their insistence that all the deficit reduction should come on that side of the ledger.

Conceptually, House Budget Committee Chairman Paul Ryan is proposing to offset all the revenue lost to the 2001 and 2003 tax cuts through reductions in Medicare, Medicaid, and other non-Social Security spending.

According to the Center on Budget and Policy Priorities, under Ryan’s plan, federal spending as a percentage of GDP would drop to the lowest level since 1951, back before Medicare and Medicaid existed. A new Congressional Budget Office analysis, meanwhile, says that the Republican plan would cut spending on everything other than Medicare, Medicaid, Social Security, and interest from around 12 percent of GDP to 3.5 percent in 2050. AS CBPP notes, because that spending includes defense, which has run at least 3 percent of GDP annually since 1940, little or nothing would be left for other programs.

Here’s a further reality check on Republican insistence that additional revenue should be off the table. We have now had two bipartisan deficit panels and both have come to the same basic conclusion: Solving our deficit problem will require both spending cuts and additional revenue.

The widely praised Simpson-Bowles deficit commission report called for about one-fourth of the long-term deficit reduction to come from new revenues. A panel headed by former Senate Budget Chairman Pete Domenici, a Republican, and former Clinton budget director Alice Rivlin, a Democrat, said additional revenues should account for about 40 percent of deficit reduction.

Against that backdrop, Ryan’s plan should be understood not as the tough-but-necessary fiscal prescription it purports to be, but rather as a conservative ideological declaration: Protecting the tax cuts is so important that it justifies painful reductions in the public health care programs for elderly and low-income Americans, and draconian cuts almost everywhere else.

For his part, President Obama is guilty of a failure to lead in a meaningful way. Rather than tackle our long-term fiscal problems in a forthright manner, he’s done just enough to backstop a political claim that he’s addressing the issue. Why that timid posture? Because real leadership would require the president to tell middle-class Americans a hard truth: If you want to keep your taxes where they are, your public benefits are going to suffer.

Instead, Obama appears to be engaged in a rope-a-dope strategy vis a vis congressional Republicans. Ultimately, that strategy may work as the real consequences of the House Republicans’ plan become apparent. But let’s be honest: It’s hardly bold political leadership.

Scot Lehigh can be reached at lehigh@globe.com.