Commission of sin

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Michael Tanner
Senior Fellow, Cato Institute
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      Michael Tanner

      Michael Tanner heads research into a variety of domestic policies with a particular emphasis on health care reform, social welfare policy, and Social Security. His most recent book, Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution (2007), chronicles the demise of the Republican party as it has shifted away from its limited government roots and warns that reform is necessary to avoid continual electoral defeat.

      Under Tanner's direction, Cato launched the Project on Social Security Choice, which is widely considered the leading impetus for transforming the soon-to-be-bankrupt system into a private savings program. Time Magazine calls Tanner, "one of the architects of the private accounts movement," and Congressional Quarterly named him one of the nation's five most influential experts on Social Security.

      His other books include, Healthy Competition: What's Holding Back Health Care and How to Free It (Second Edition, 2007), The Poverty of Welfare: Helping Others in Civil Society (2003), and A New Deal for Social Security (1998). Tanner's writings have appeared in nearly every major American newspaper, including the New York Times, Washington Post, Los Angeles Times, Wall Street Journal, and USA Today. A prolific writer and frequent guest lecturer, Tanner appears regularly on network and cable news programs. Before joining Cato in 1993, Tanner served as director of research of the Georgia Public Policy Foundation and as legislative director for the American Legislative Exchange Council.

So, President Obama wants a presidential commission on the budget deficit. Isn’t that a little bit like W.C. Fields asking for a commission on sobriety?

Hypocrisy aside, the whole idea of a deficit commission is misguided.

That’s not to say budget deficits are good. This year, the federal government will run a deficit of more than $1.35 trillion this year. “Yes, that’s trillion with a “T.” That’s a deficit larger than the entire federal budget in 2000. And things are only going to get worse in the future. The Obama administration projects further deficits of more than $9 trillion over the next 10 years. Our total national debt exceeds $12 trillion and counting, with huge shortfalls in Social Security and Medicare just over the horizon. Clearly, this can’t go on.

But to focus on the deficit is to confuse the symptom with the disease.

As Milton Friedman often explained, the real issue is not how you pay for government spending—debt or taxes—but the spending itself. In other words, don’t just look at the deficit; look at why we have a deficit. And the reason why we have a deficit is pretty simple—government spends too much.

For years, Republicans have tried to dodge the tough questions about government spending by substituting debt for taxes. They felt that as long as they were cutting taxes, no one would notice that they were spending like drunken Democrats.

Now, Democrats want to substitute taxes for debt. They haven’t sobered up, they just want someone else to pay the bar tab. Both are equally wrong.

As mentioned, when President Bush became president, the entire federal budget was $1.2 trillion. By the time he left office, it was $2.9 trillion. This year, President Obama proposed a federal budget that would spend $3.55 trillion.

As a result of this bipartisan profligacy, federal spending topped 24.7 percent of gross domestic product last year, the highest peacetime percentage in U.S. history. And, while the optimistic projections of the most recent Obama budget see that declining ever so slightly to 23.7 percent by 2020 (for comparison the historical average has been roughly 21 percent of GDP). But that respite, such as it is, will be only temporary. As the full force of entitlement programs kicks in, the federal government will consume more than 40 percent of GDP by the middle of the century. Throw in state and local government spending, and governments will control well over half of the U.S. economy.

Meanwhile, federal taxes have traditionally run at around 18 percent of GDP. (Currently, they are down somewhat, around 15 percent of GDP). Thus, a growing budget gap, to which we can expect a commission to respond—well, raise taxes.

  • logic

    The formation of such a commission is by itself a glaring example of the clueless establishment. We need a commission to study the deficit? Our elected officials are so detached from it that they need a commission to help them figure it out? The drunken analogy is appropriate, because Republicrats ARE drunk on spending our money. There is absolutely none of the reality in gov’t that the rest of Americans have to face every day. I saw a Senate hearing on C-Span some months ago with a panel of economic experts telling our Senators that they have to face that gov’t is growing and taxes MUST be increased to fund it. Not one rebutted their testimony. Not one offered that radical concept of spending cuts. Not one offered the radical concept of boosting the economy NOT stealing from the taxpayers. It was like telling your kids their dog died. They were stunned at this shocking revelation. In other words, they are completely useless, and in fact detrimental, to the American way of life they have sworn to protect.