Ryan Streeter
As Paul Ryan and the House Republicans roll out their much-anticipated 2012 budget today, our public debate will hopefully shift toward the bigger issues: how to manage the trillion-dollar, not billion-dollar, challenges we face as a society. Ryan's budget should get us talking about the long-term, the future of our country.
So, at the start of this debate, it’s worth thinking about what the end-game should be.
For one thing, we should be asking what the proper framework for government revenues and expenditures should be in the long run. In the current issue of Reason Nick Gillespie and Veronique de Rugy have an essay that any serious federal budget-cutter should read.
They propose using the CBO’s projection that federal revenue will equal roughly 19% of GDP in coming years as a gauge for federal spending. This is strikes me as a good conceptual framework as the debate starts today over the GOP budget and what it means for the future.
Gillespie and de Rugy write:
[A]s a starting point, we assume that federal revenue will be about 19 percent of GDP in any given year. To put that into plain numbers, the GDP in 2010 was about $14.6 trillion. If the government spent 19 percent of GDP, it would have spent no more than $2.8 trillion, as opposed to the $3.6 trillion it actually shelled out…In absolute dollars, getting to 19 percent immediately would mean cutting $829 billion out of the budget, which isn’t a politically realistic target at the moment. Getting to 19 percent within a few years, though, would require a series of far smaller cuts because of the expected economic recovery. One of the tasks assigned to Obama’s debt commission was finding ways to close the primary spending gap (the deficit excluding interest payments) in 2015. That would mean cutting about $243 billion from a budget projected to be $4.1 trillion.
That’s a 5.9 percent reduction, the sort of cut that many businesses and households have managed relatively easily during the recession.
They lay out the stakes for not taking a comprehensive, aggressive spending cuts program seriously:
Total spending in 2020 is projected to be more than $5 trillion under the CBO’s alternative scenario, or 26 percent of GDP. There is simply no realistic way the federal government will be able to raise that kind of revenue. Since 1950 the government has collected revenue above 20 percent of GDP exactly once. That was in 2000 and the percentage was 20.6. Good luck getting to 26.
The 19% exercise is a useful one, and I would go so far to say it should serve as a policymaking framework. The problem with our current discretionary spending debate is that it is unhinged from any intelligible government reform goal. No one can articulate why $60 billion, not $70 billion or $50 billion, matters seriously in the long-run. It’s merely an attempt to come good on last year’s Pledge to America – which itself was not rooted in a comprehensive plan to reform government finances.
Such a plan, if it is to proceed toward a goal of restoring fiscal sanity without raising taxes, needs to be rooted in a fundamental reworking of the welfare state. We cannot build a governing agenda based on numbers and projections. The goal should be changing what we expect from government so hitting the numeric targets along the way is part of a fundamental reworking of the state and how it functions.
The best recent statement on this idea is Yuval Levin’s National Affairs essay, Beyond the Welfare State. After walking the reader through a history of how the welfare state we’ve created has outlived its original purposes and created unmanageable costs, Levin concludes:
Our welfare state is very poorly suited to the kind of society we are — an aging society in which older people are, on the whole, wealthier than younger people. And it is very poorly suited to the kind of society we want to be — enterprising and vibrant, with a free economy, devoted to social mobility and eager to offer a hand up to the poor. A successful reform agenda would have to take account of both.
He then proposes 5 fundamental reforms, based on the idea that a reformed government should abandon the “empty promise of material equality” in favor of “a fervent commitment to upward mobility.”
- First, we need “a simple and predictable tax system, with a broad base and low rates, free of most of today's deductions and exclusions.”
- Second, “government benefits — including benefits for the elderly — should be means-tested so that those in greater need receive more help and those who are not needy do not become dependent on public support.”
- Third, “we should advance a consumer-based health-care system — backed with fixed, means-tested premium supports — in which individuals purchase their own insurance in a free market regulated largely by the states.”
- Fourth, policymakers should “gradually but significantly reduce domestic discretionary spending, ending most of the discretionary Great Society programs and folding others into block grants to the states.”
- Fifth, we should cut back the vast administrative discretion the state has accrued for itself, and go back to rule-based management in regulatory, monetary, and other policy as much as possible.
I would add a reform agenda has to figure out how and to what extend the federal government is involved in physical and human capital investment aimed at competitiveness and growth.
A six-point reform agenda based on these ideas provides us with a reasonable gauge for critiquing 2012 the ideas of presidential contenders, not to mention congressional leaders who talk about fixing America’s long-term spending problems.
The conclusions of the Gillespie and de Rugy essay extend beyond a discussion about the welfare state and into military spending, but the an honest assessment of our future suggests that a fundamental reworking of the welfare state – which, in Levin’s conception of it, includes entitlements and not just discretionary aid to the poor – is essential for our survival.
A 19% program supported by a six-point reform agenda is a good place for tomorrow’s reformers to start today.
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