October 27, 2013
By Patrick Louis Knudsen
Even as the recent debt-ceiling and quasi-shutdown agreement was on its way to the White House, congressional liberals already were renewing their quest for higher taxes.
“I am hopeful we can now work together in a budget conference toward a balanced and bipartisan deal,” said Senate Budget Committee Chairman Patty Murray, Washington Democrat, in formally requesting negotiations with the House.
This, of course, is the left’s code for demanding higher tax revenues in any plan that reduces spending. It’s the same disingenuous language they used leading up to January’s “fiscal cliff” resolution, which increased both taxes and spending. A corollary this time is raising taxes to offset relief from the automatic sequestration cuts written in law — the kind of proposal that used to be called “tax and spend.”
The “balanced” approach might sound good but, in fact, it’s a distraction from the real source of all the government’s fiscal problems.
To dispose of the obvious first: President Obama and congressional liberals — whose crowning legislative achievement commandeers what’s left of the nongovernment health care sector (government already controls nearly half of all medical spending) — have no intention of slowing the growth of government. They just want more spending, chased by higher taxes.
More importantly, though, the spending-cut and tax-increase formulation rests on the cultivated fallacy that deficits are the central fiscal policy issue — and that spending and taxes are just mirror-image means of reducing them. This view ignores the real cause-and-effect of government budgeting: Deficits are a symptom of excessive government spending, and spending restraint is the only cure.
This is not an ideological argument. With government, spending always comes first. Indeed, spending defines government. “In a fundamental sense, the government is what it spends,” says longtime budget expert Allen Schick.
Spending drives every other fiscal consequence. It determines how much government must tax or borrow, both of which drain economic resources that might otherwise be available for growth-producing activities. That’s why spending also is one of the best measures of the size and scope of government and its burden on the economy. Limiting spending is a principal means of limiting government.
If this argument is not persuasive enough, budget numbers seal the case for pursuing spending control.
Total federal spending is projected to rise by 69 percent over the next 10 years, according to the Heritage Foundation’s report “Federal Spending by the Numbers 2013” — and that’s even if Congress maintains the scheduled sequestration cuts.
The main driver of that spending will be federal entitlements, which account for roughly 60 percent of the government’s outlays and increasingly dominate the budget. These programs — including Medicare, Medicaid, Obamacare, Social Security and various welfare benefits — will grow 79 percent during the next decade. Mr. Obama’s misnamed Affordable Care Act alone is projected to raise spending by nearly $1.8 trillion over the next 10 years.
One reason for the entitlements’ unrestrained growth is their design. These programs run “on autopilot without any congressional involvement or control,” writes economist David R. Malpass. “So much for the Constitution’s bedrock principle that ‘No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.’”
Even with the more than $600 billion worth of tax increases enacted in January, total federal spending will outpace revenue by increasing amounts starting in 2016, leading to growing, chronic deficits once again exceeding $1 trillion by 2022 — and that trend will worsen beyond the next decade.
These deficits do matter. They promote higher levels of spending than would occur if Congress held outlays to the government’s tax collections. They also are raising the government’s debt to levels that, if uncontrolled, threaten to undermine the economy.
The only sure way to reduce these deficits, however, is to control spending — and that must be the focus of the budget debate.
Spending control cannot be achieved solely by reforming the budget process (though it does need reform), or through some mystical “grand bargain” or “budget summit.” It will require a sustained effort, over several years, at realigning government priorities, discarding those that are not true requirements of the national government, and fundamentally restructuring government programs, especially the entitlements.
Those who shudder at the thought of such “austerity” should remember that government does not create the resources it so generously redistributes — the economy does. The more government smothers economic activity under public spending, taxes, borrowing and regulation, the less there is for everyone — those who rely on the government’s safety net and those who don’t.
Balanced budgets are still the soundest benchmark for public finance, but how balance is achieved is crucial. The only true and lasting balance comes from limiting government — and that requires limiting government spending.
- Patrick Louis Knudsen, a Washington-area writer and visiting fellow at the Heritage Foundation, served for 20 years on the staff of the House Budget Committee.
Originally appeared in the Washington Times
Patrick Louis Knudsen
Consultant - Visiting Fellow
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