Debt reduction versus government reduction
posted at 5:41 pm on December 1, 2010 by J.E. Dyer
It isn’t surprising, when you think about it, that the president’s debt-reduction commission has come out with a plan that proposes to inflict the greatest pain on contributor benefits (Social Security and Medicare), household budgets, and national defense. The commission was asked to propose ways to reduce debt. It wasn’t asked to rethink the size, scope, or charter of government.
If the latter had been its assigned objective, the panel might have come up with proposals that don’t concentrate most of the pain of sustaining our current level of government on middle-class household budgets and small businesses. There is no question we need to deal with our spiraling debt, but what the debt-reduction panel has published today is a good example of an outcome based on biased assumptions.
The panel was obviously willing to rethink some assumptions: those about the economic lives of American households and small businesses. Eliminating the mortgage deduction – even just for mortgages over $500,000 – and raising the gas tax by 15 cents per gallon will have their biggest impact on middle-class households. So will delaying eligibility for Social Security, and means-testing to determine the level of benefits. So will taxing employer-provided health insurance as income. So will reducing Medicare benefits. Each of these measures by itself digs deeper into a household’s current income; added together they are likely to begin limiting many Americans’ lifestyle options, in such basics as the ability to own a home and send children to college while saving for retirement and medical expenses. They have the power to change what it means to be “middle class” in America.
This is a great deal to ask of the people. It would be one thing to ask it while reducing government, its role in the people’s lives, and its role the U.S. economy as a whole. More Americans every day, for example, are willing to consider restructuring Social Security: to eventually phase it out or make it entirely a means-tested program for the lowest-income retirees. But the “government-restructuring” aspect of debt reduction clearly came in for almost no rethinking at all. The debt-reduction panel proposes mainly to cut federal spending to pre-2008 levels and set spending caps for the federal agencies, at least through 2020. It also suggests eliminating agricultural subsidies. I can support both these recommendations, but they don’t go far enough.
Virtually all the federal agencies would remain in place. Entities like the Environmental Protection Agency, the Departments of Education and Health and Human Services, and the Food and Drug Administration would retain their current portfolios to regulate, litigate, and spend federal tax dollars in ways not envisioned by their charters from Congress. Ukases from the federal regulatory agencies have a significant and growing impact on the people in their economic lives, something small businesses have dealt with for years and individuals are now beginning to understand. Declining to eliminate or restructure them is a decision about economics – and it will affect the willingness of the people to suffer in tackling federal debt. And it should.
A debt-reduction proposal that will make it difficult – perhaps impossible – for many people in their 20s and 30s to buy homes, while leaving them to contemplate how federal regulators are driving their utility and health-insurance bills up, is not a proposal likely to keep Americans feeling positive about their estate as citizens. The model of government by which federal agencies prescribe to us what a middle-class lifestyle consists of, and confiscate from us whatever we have above and beyond that, is only a philosophical half-step away at this point. The people are absolutely right to view this prospect with disapprobation and resentment.
Members of the public who object to the proposed measures will be denigrated as whining and irresponsible. Some of them probably are. But that’s not the point. The point is that, in the debt-reduction panel’s plan, gouging American households to pay down the debt is being done instead of reducing the size of government. We should eliminate whole federal agencies and many pounds of regulatory tomes before we ask Americans to choose between saving for retirement and buying a home, or between paying for medical care and sending kids to college. Life by itself imposes choices on us; but when government gets into the business of picking and choosing, or forcing canned choices on us, the silly, subjective question of who’s “being a big baby” actually starts infecting our political decisions. That is 100% detrimental to communal life.
Our contributor benefits are unsustainable. But they are part of a larger problem of unsustainability created by holistic, prophylactic government. We could actually afford both Social Security and Medicare a lot better if government regulation weren’t actively suppressing business formation today; if government regulation didn’t drive every aspect of the cost of medical practice up; if government regulation didn’t drive consumer prices up and make COLAs necessary; and if government regulation didn’t divert so much worker compensation from worker income to employers’ other mandated, per-worker remissions (non-Social Security/non-Medicare) to the government.
A presidential debt-reduction panel should not be proposing to us that Americans accept a reduced lifestyle so that the current footprint of government doesn’t have to change. As we say in the military, that’s bass-ackward. It’s what this panel has just done. I’m sure the panel did what it was asked to do, but it was asked to do the wrong thing.
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