My colleague Dan Mitchell discussed the good, the bad, and the ugly in the deficit reduction plan released by the bipartisan group of senators known as the “Gang of Six.” As Dan noted, the plan is more of an outline and a complete assessment isn’t possible until more details emerge. However, the fact that President Obama immediately embraced the plan ought to tell proponents of limited government all they need to know.
Here are some random thoughts on the plan:
- There’s nothing impressive about the “immediate” $500 billion in deficit reduction. That figure includes revenue increases, so it’s not even $500 billion in spending cuts. And I’m not sure why they say “immediate” when they probably mean that the reductions would occur over the next several fiscal years. The deficit alone for next year will probably be at least $1 trillion.
- The plan promises about $2.5 trillion in spending reductions over 10 years. As I’ve been pointing out, $2 trillion in spending cuts isn’t a lot when compared to the $46 trillion the government is projected to spend over the next decade. See this Cato video for more.
- Tax reform is fine; more revenue for the government is not. Transferring more resources from the private sector to the government is a loser for both economic and individual liberty. In addition, the plan’s requirement that tax reform “maintain or improve the progressivity of the tax code” would result in more Americans viewing the federal government’s spending programs as a “free lunch.”
- My anti-tax credentials are beyond question: I equate taxation with theft. But I don’t like debt-financed spending any more than I like tax-financed spending. Had anti-tax advocates and Republicans put the same amount of effort into restraining spending during the Bush/Republican Congress years as they did in cutting taxes, we might not be facing the prospect of a large tax increase today. Unfortunately, I see little evidence that that lesson has been learned.
- The plan does almost nothing to rein in the scope of federal government’s activities. It doesn’t seem to matter which party or ideological faction on Capitol Hill releases a plan – conservatives, moderates, and liberals all apparently assume that the federal government should continue doing everything that it currently does. Generally speaking, Democrats want more tax revenue to maintain an expansive government. Republicans talk about smaller government, but only a handful can articulate exactly what programs or functions they’d eliminate. It’s more common to hear Republicans blubber on about “reducing waste, fraud, and abuse” in government programs and “saving” the pillars of the welfare state (Social Security and Medicare) for “future generations.”
- Our global military presence would make a Roman emperor blush and our Founding Fathers roll over in their graves, but there’s nothing in this plan to suggest that the military-industrial complex faces any threat.
In sum, if you’re hoping that debt reduction will be brought about through a reduction in the federal warfare/welfare state, you’re going to have to wait for a different plan. And the sad truth is that no such plan is going to materialize anytime soon – at least not one that will get through Congress and signed by the president. But look on the bright side – we’re not Greece! Not yet.