There are only two possibilities, mathematically speaking — either we have a balanced budget, or debt goes up. Can people of all political stripes agree on that?

Here is my question to my friends on the conservative end of the spectrum. Assuming that continuously increasing debt is intolerable, we must balance the budget, right? Okay, how do we accomplish that? There are only two variables in the balanced budget equation: spending and taxation. But you flatly reject taxation as a solution. So that leaves us trying to balance the budget ENTIRELY through spending cuts. With the deficit running at $1.3 trillion annually, we would need spending cuts in that amount to balance the budget. I would be curious just what cuts you have in mind of that magnitude. If you cannot cut $1.3 trillion in spending, and if we cannot raise taxes, then how is it mathematically possible to balance the budget? And if you cannot balance the budget, are you not advocating for for increased federal debt? The math is inescapable.

Here is my question to my friends on the liberal end of the spectrum. This is a breakdown of Obama’s FY2010 budget:

Mandatory spending: $2.184 trillion (+15.6%):
$695 billion (+4.9%) – Social Security
$453 billion (+6.6%) – Medicare
$290 billion (+12.0%) – Medicaid
$0 billion (−100%) – Troubled Asset Relief Program (TARP)
$0 billion (−100%) – Financial stabilization efforts
$11 billion (+275%) – Potential disaster costs
$571 billion (−15.2%) – Other mandatory programs
$164 billion (+18.0%) – Interest on National Debt

Discretionary spending: $1.368 trillion (+13.1%):
$663.7 billion (+12.7%) – Department of Defense (including Overseas Contingency Operations)
$78.7 billion (−1.7%) – Department of Health and Human Services
$72.5 billion (+2.8%) – Department of Transportation
$52.5 billion (+10.3%) – Department of Veterans Affairs
$51.7 billion (+40.9%) – Department of State and Other International Programs
$47.5 billion (+18.5%) – Department of Housing and Urban Development
$46.7 billion (+12.8%) – Department of Education
$42.7 billion (+1.2%) – Department of Homeland Security
$26.3 billion (−0.4%) – Department of Energy
$26.0 billion (+8.8%) – Department of Agriculture
$23.9 billion (−6.3%) – Department of Justice
$18.7 billion (+5.1%) – National Aeronautics and Space Administration
$13.8 billion (+48.4%) – Department of Commerce
$13.3 billion (+4.7%) – Department of Labor
$13.3 billion (+4.7%) – Department of the Treasury
$12.0 billion (+6.2%) – Department of the Interior
$10.5 billion (+34.6%) – Environmental Protection Agency
$9.7 billion (+10.2%) – Social Security Administration
$7.0 billion (+1.4%) – National Science Foundation
$5.1 billion (−3.8%) – Corps of Engineers
$5.0 billion (+100%) – National Infrastructure Bank
$1.1 billion (+22.2%) – Corporation for National and Community Service
$0.7 billion (0.0%) – Small Business Administration
$0.6 billion (−14.3%) – General Services Administration
$19.8 billion (+3.7%) – Other Agencies
$105 billion – Other

Why must we have a 13.1% increase in discretionary spending? Isn’t that the height of irresponsibility in these times? The economy is booming again. The stock market is up by 60% in the past year. The massive job losses  of 2007-08 have ended, and all signs point to job creation around the corner as the economy continues to expand. Surely we can have a budget that acknowledges the economic drag that $1.3 trillion annual deficits, and $13 trillion of cumulative federal debt, have.

No matter how I look at things, I come back to the same conclusion. Ideologues are America’s greatest enemy.

Somewhere along the line, the inside-the-beltway debate has lost sight of the real mandate that we sent a new crop of elected officials to Washington to pursue: to provide a stable means of access to decent health care for the tens of millions who lack it.

The status quo fails vast numbers of Americans. Obviously, many millions simply lack insurance, and the problem starts right there. They are forced to rely on a costly and ineffective hodge-podge of solutions. Famously, our most expensive care-giving mechanism, emergency rooms, is used to provide basic care. Hospitals write off that bad debt and recoup the cost through higher insurance premiums on the rest of us. Or, people get themselves to a doctor, but then fail to take the expensive medication or get the follow up treatment. Health issues accumulate, and costs spiral higher still.

People fail to have insurance for a lot of reasons. Some people make too much money to qualify for Medicaid but not enough to afford insurance. Employers who rely upon low-paid workforces cannot remain competitive if they try to provide health insurance benefits costing $500 a month to people who make $1500 a month. Insurance companies somehow have settled on this practice of pre-existing conditions — perhaps not fully considering that, while they may avoid insuring the next unwell person, they also are retaining the current unwell person, who now cannot leave his job. Or, a person is stuck with sky-high COBRA premiums. Or simply is young and thinks herself immortal and unwilling to insure the risk of medical expenses.

Whatever all the causes, the status quo is clearly askew beyond all measure. We need only reflect on the often-repeated refrain that the US spends the most money in the world to achieve average, at best, health.

So, back to the mandate. How do we provide a stable means of access to decent health care for the tens of millions who lack it?

1. Cost containment. Without this, we cannot both provide access to all and not break the bank. But where is this in the Washington debate? Neither party in Congress is offering any clear-cut cost containment strategies. Democrats have taken taxation of health benefits off the table. Without that, the CBO says, people have no incentive to moderate consumption of healthcare. They also have taken tort reform off the table, another aspect that some analysts believe could hold down costs. Republicans are behind tort reform, but are offering nothing beyond that whatsoever, and tort reform is a small piece of the package. It’s like going on a diet by giving up sprinkles on your donuts.

2. Universal access. Forget about private versus public. One way or another, access to stable healthcare is the moral imperative here. Republican ideas are focused around helping people buy insurance by offering tax advantages for doing so. Not only does that smack of the recently exposed federal mortgage policies (which, oddly, Republicans have denounced, while advocating a nearly identical policy for healthcare — huh??), but also it fails to address the issue. The people who lack insurance skew hugely to the lower income population. These are people making $1500 to $2000 a month. Health insurance for a family of four costs $500, $600, $1000 a month. Giving a tax break worth 15% of that cost hardly puts it within reach. Democrat proposals are better in terms of access, but still will leave many millions on the outside looking in.

Here is what I wish we would hear from President Obama: “I will veto any plan which fails to provide health insurance to all Americans. This may be private, public, or a combination of both. I will veto any plan which increases the nation’s total expenditures on healthcare. Government spending may go up or down, private spending may go up or down, but the total of the two must not increase. Congress, keep working until you have a plan that fits those two simple — but devilishly challenging, I am sure — guidelines. Other than these two parameters, nothing is off limits.”

Hopefully Obama would allow lots of room for Congressional debate, within these parameters. Taxing benefits is not off limits; if healthcare spending does not increase, then by definition whatever Americans pay in taxes for it will be offset by decreased outlays in other ways. Tort reform is not off limits. Reforms of existing health insurance plans is not off limits. How about we scrap the entire costly, antiquated and ineffective VA medical system, and simply issue Medicare cards to all veterans (why do we have a whole separate healthcare system for that purpose, anyway???). How about we allow doctors to make any medical decision they wish to, but we lessen the payment when that decision is contraindicated by large-scale studies? (In other words, go ahead and get the unnecessary Caesarean section if you want to, but don’t expect your insurance company to pay more than it would for a routine delivery.)

That is to say, dig deep, be truly creative, be bold and innovative. The very worst part of this whole debate is that it is mired in staleness, mired in the dismal workings of Congress and government. But it doesn’t have to be that way. In fact, I venture to say, we elected President Obama precisely because he reminded us that it doesn’t have to be this way. So, Mr. President, go punch Congress in the freakin’ nose and get this right.

The Democrats: Punch the accelerator. The intent is to make the recession shorter and less severe. But the risk is that our economy may have a hard time absorbing the costs of the massive intervention, and long term growth is lessened if the Democrats cannot find the brakes after the crisis has passed.

The Republicans: Slam on the breaks. Their intent is to let the recession run its full course, so that the economy that emerges afterwards is best positioned for long-term growth. Their budget plan projects, for example, jobs increases beginning in five years. The risk is measured in terms of how much additional economic damage is done if Republicans cannot find the accelerator after the crisis has passed.

I think it is important to understand that both approaches are supported by lots and lots of highly intelligent, thoughtful, competent people. Conservatives shriek about the Democrats’ plans because they are ideologically anathema to conservative doctrine, but not necessarily because they are bad policy. Liberals shriek about the Republican alternatives because they are anathema to liberal doctrine, but not necessarily because they are bad policy.

At the end of the day, we, the voters, get to decide whether to put our chips on “red” or “blue,” to use a modified roulette analogy. Neither is a sure bet; either carries huge risks.

This is my open letter to the Republican Party. I need to know if you are insincerely pandering as a minority party, or if you are being serious this time.

Republicans in Congress and elsewhere have been launching a furious attack on Obama’s economic crisis plans, and his budget proposal. There are, apparently, grave concerns about the budget deficit, the level of government spending in relation to the economy as a whole, and to the inevitable build-up of the federal debt. Bloggers and the radio folk add a polemic element, calling all of this “socialist” or even “Marxist.”

Should we expect and hope that the economy will right itself over time? There is some credible thinking along those lines, but the vast majority of credible economists conclude that government intervention is necessary to shorten the duration and lessen the severity of the recession.

Should we cut taxes? Is there an argument to be made that it is in the nation’s best interests to increase the budget deficit and increase our federal debt by reducing federal tax receipts?

Should the government intervene in a more targeted way? For example, is there something narrower that should be done to end the slide in home prices, and cope with the attendant avalanche of foreclosures? Something to prompt liquidity in the credit markets? Something to ease the hardships being felt by the unemployed, the underemployed, the business owner clinging by his fingernails?

Can you explain to me the Republican budget plan that was recently announced? [http://www.gop.gov/solutions/budget/road-to-recovery-final]. If we were to vote for you now, or next time, we will we get:

  • …a budget that “cut(s) overall nondefense spending by reforming or eliminating a host of wasteful programs deemed ineffective by various government entities”?
  • …”a simple and fair tax code with a marginal tax rate for income up to $100,000 of 10 percent and 25 percent for any income thereafter, with a generous standard deduction and personal exemption”?

You controlled the White House and Congress from 2001 through 2007, and you never proposed any of this.

Your budget document calls for reducing taxes, reducing deficits and reducing federal debt. I do not understand. Doesn’t reducing taxes add to deficits and therefore debt? On the subject of debt, you write, “The debt held by the public will exceed 50 percent of GDP this year and increase to 82 percent of GDP ten years from now. History tells us what governments do with such levels of debt and what happens to their citizens.” In fact, almost $9 trillion of the current $11 trillion of federal debt came under Republican presidents. Is this a change of heart on your part?

Can you explain to me your party’s support of bailouts in September 2008, and your opposition to them now?

Finally, can you provide me with an honest reckoning of this: How much of the Obama spending is an unfortunate necessity, arising from the huge spending increases, deficit and debt growth, off-budget spending on the Iraq war, and credit market oversight laxness of the last ten years?

In short, convince me that your President right now wouldn’t be doing exactly the same things, given current economic conditions and your party’s own history of reckless spending.

Thanks. I’ll be looking forward to your reply.

CPAC and other conservative action groups are up in arms about Obama’s stimulus package and budget proposal. A primary basis of the attack is the plan to raise taxes, specifically to let lapse the Bush tax cut. For the conservatives, apparently, Bush’s maximum tax bracket of 35.0% meets with unquestioned approval, and Obama’s 39.6% maximum tax rate is utterly contemptible.

Such an incredibly fine-tuned sense of indignation the conservatives have! Apparently, somewhere in that span of 4.6%, we cross an invisible line from endless prosperity to eternal doom.

Not only is that precise identification of the disaster line presumptuous and laughable, it utterly fails any historical perspective test. Obama’s highest tax rate will be lower than the entire period from 1940 to the present, except for two brief periods. One was 1988 through 1992, and the other is 2001 to the present. It is interesting to note that each of those exception periods ended in recession. Obama’s tax plan will keep the marginal tax rate lower than it was even during the conservative-hallowed Reagan years. Only in Reagan’s final year in office did the highest federal income tax rate drop below 50%.

The stark reality about tax cuts ignored by conservatives is that lowering taxes is not fiscally conservative. The conservatives may wish or dream that lower taxes is a pragmatic approach to limiting the scope of government, but that is simply fiction.

Spending has increased unabated through Democratic and Republican administrations alike, through Democratic and Republican Congresses alike. Ronald Reagan? Federal spending, even excluding defense, increased an average of 7.1% per year during his two terms. In fact, federal spending has risen faster under Republican presidents than Democratic ones, and just as fast under Republican Congressional leadership as Democratic.[1,2].

Historically, there is only one fiscal difference between Republicans and Democrats. Democrats pay for their spending through taxation; Republicans do not. As a result, 80% of the current $11 trillion of federal debt arose under Republican presidents. This includes vast increases under Reagan, GHW Bush, and, taking vast federal debt to a whole new level, GW Bush.

So, when we embrace the conservative tax-cutting ideology, we get recessions and massive federal debt. When we pay for our spending as we go, we get prosperity and at least our debt doesn’t grow. And the notion that holding the line on taxes somehow magically restrains the scale of the federal government is utter nonsense.

I’m already tired of Republican carping about the size of Obama’s budget. I am tired of hearing about how “the Reagan Revolution” is being undone. I am tired about Republican posturing as fiscal conservatives. The truth is that Republicans are and always have been mad spenders of federal money, and not just for defense. Reducing taxes is fiscally conservative only if the budget gap is not filled with debt.

Test your knowledge of modern Republican fiscal conservatism:

1. Excluding defense spending, does Federal spending historically rises faster under Republican or Democratic administrations?

                     A: Republicans, at a rate of 9.4% per year, versus 8.6% per year for Democrats.

2. Among our four most recent ex-presidents — Reagan, GHW Bush, Clinton and GW Bush — which one increased federal spending at the fastest annual rate? The slowest?

                     A: The fastest was Reagan @ 7.6% per year. The slowest was Clinton @ 3.3%. GHW Bush was 6.7% and GW Bush was 6.2%.

3. On a percentage basis, who increased defense spending more, Carter or Reagan?

                     A: Carter, with an average annual increase of 10.0%. Reagan’s average increase was 8.8%, although it should be noted that his additional defense spending was on top of Carter’s.

4. Excluding defense spending, how much did Reagan shrink the scope of federal spending?

                     A: Are you kidding? Non-defense spending under Reagan increased an average of 7.1% per year.

5. Federal debt at the end of fiscal year 2007 was $9.007 trillion. This is an increase of $8.749 trillion since 1952. Of that increase what percentage occured during Republican administrations?

                     A: 78%. Federal debt rose by $27.2 billion under Eisenhower; by $272.8 billion under Nixon/Ford; by $1694.6 billion under Reagan; by $1462.3 billion under GHW Bush; and by $3333.5 billion under GW Bush. Note: this does not include the 2008 fiscal year, which added something like another $1 trillion to the federal debt. All Democratic presidents combined, back to Kennedy, added just $1958.2 billion to the federal debt.

6. President Obama proposes to roll back the so-called Bush tax cut. This will raise the maximum federal income tax rate from 35.00% to 39.60%. What would Reagan think of this?

                     A: For the first seven years of Reagan’s presidency, the maximum tax rate was 38.5% or higher. For the first six years, it was 50.0% or higher. Only during his final year in office was the maximum tax rate cut to 28.0%. In fact, for the entire period from 1940 to 2002, the highest federal income tax bracket has been less than 39.6% only for the years 1987 through 1992, and 2001 through the present. From 1940 through 1986, it never was less than 50.0%.

                     The point is, whether the maximum federal income tax rate is 35.0% as it is now, or 39.6% where it was before, both rates are very low by any historical standard. It is utterly specious to claim, as we now hear from Republicans, that allowing the Bush tax cut to expire somehow turns us into a European-style socialist government.

Sources: http://www.usgovernmentspending.com/. http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213