With four deficit reduction plans swirling about, America is locked in a historic debate not just about how government should work, but what its purpose should be

Ryan Streeter

There are 3 main efforts underway to confront the nation’s debt and deficit. And it looks like we'll see a fourth soon. These plans, taken together, represent a debate we're having in America about the purpose of government itself.

The first of the plans is Paul Ryan’s budget, which is the most developed (because Ryan has taken the time and political risk to develop it).

The second is President Obama’s, which was proposed essentially in response to Ryan’s and includes a new bipartisan work group charged with finding a solution.

The third is the plan in the works by the secretive Gang of Six in the Senate. This group might be thought of as the true heirs of Obama’s fiscal commission. From their public statements, the Gang’s members seem to be wrestling with the fiscal commission’s proposals more than Obama has done.

The fourth plan looks like it will be coming from former Comptroller of the United States, David Walker. He will be unveiling the plan in June, according to Mort Kondracke in yesterday’s Roll Call. While not an elected official (the other 3 plans are put forward by people currently charged with governing), Walker is a highly respected former official who has done as much as anyone over the past decade to promote fiscal reform.

He says he will come out with a Plan A and Plan B in June. Plan A will include more drastic entitlement cuts than the Bowles-Simpson commission and a small consumption tax. Plan B will include a more “draconian” set of cuts that will automatically kick in if debt targets are not met.

At this point it is unclear if Walker’s ideas will help the debate or make things more muddled than they already are. We’ll see.

In reality, our solution to America’s debt-and-deficit crisis will not be one of the plans at the exclusion of the others. It will ultimately be a blend. The question is which framework will dominate.

The debate over these deficit reduction plans is more than an accounting game. The plans represent a battle over the purpose of government itself. Should our government still provide universal social insurance? Should the wealthy receive the same benefits as the middle class? Should taxes exist purely to raise revenue or to incentivize certain behaviors? While the outcome of the battle is far from clear, the direction we’re headed - despite sharp disagreements between the plans - suggests a few eventual outcomes that would have been unthinkable just a few years ago.

1. The end of the era of guaranteed benefits. Ryan has been the most explicit about the need to move away from defining benefits in Medicare and Social Security to a defined contribution approach, but the reality is that all plans recognize – explicitly or not – that the current benefits structure won’t work. It has to go. We have been overwhelmed by basic math. Whether we limit the  contributions on the front end or ration them on the back end is now the focus of the debate.
2. The end of a tax code used as a complicated policy mechanism. It remains to be seen how politically feasible specific tax cuts or increases will be, but the idea that using our tax code as a way to deliver thousands of benefits is becoming discredited. Figuring out a fix will likely be a bigger battle than what we’ve seen over spending cuts and entitlement reform, because the vested interests are strong and deep. But while debating our tax code has been more theoretical in the past, it’s now a key part of saving America’ fiscal health.
3. Sizing government to the economy. The idea of pegging government’s outlays to GDP has been around a long time, but again, it has always been more theoretical than now. Today, it’s a live issue and gaining support because of the alarming growth we've seen in government spending (Walker says he favors a higher threshold than the 21.5% figure in the Corker-McCaskill plan, which is attracting support). This issue is important because it forces us to switch from asking what can government do to what must government do. Spending caps have a way of focusing attention on the essentials. How and whether to fix this notion into law is now a live debate.

We as a country are debating how we deliver a host of benefits to ourselves through our government. And in so doing, we have subtly started debating among ourselves why we are delivering those benefits to ourselves.

The "why" debate hasn’t materialized enough yet, but it’s of a magnitude even greater than the welfare reform debate in 1990s, which similarly involved public arguments about “why” we subsidize individuals and communities as we do even as we debated "how" we should provide support to low-income people. Today, as we debate why we tax ourselves and deliver benefits to ourselves as we do, we are locked in a battle about the purpose of government itself. Arguments abound as to why it will make bad politics to focus too much on tax reform and entitlements in the 2012 elections, but more than ever, America seems ready for a public debate about what government should be doing in the first place - and why.