Washington – Do progressives care about reducing the national debt? Of course they do, no matter what the White House might believe.
“We think that obviously there are some Democrats who don't feel as strongly about deficit reduction as (President Obama) does,” senior adviser David Plouffe said Wednesday at a breakfast with reporters and columnists. But that's not obvious at all. It isn't even true.
There's no dispute about where we need to go. The question is what path to take.
Clearly, the federal government cannot continue spending at a rate of 25 percent of GDP while taking in revenues that equal less than 15 percent of GDP, as is the case this year. We would reach the point where debt service crowds out health care, education and other priorities dear to progressives' hearts. Major investments the nation desperately needs to make — for infrastructure and energy research, for example — would be impossible. Decline would be inevitable.
The way to avoid this dystopian future is to bring spending and revenues more into balance. Yes, there will be some pain and sacrifice. But it is not necessary — nor is it wise — to heap a disproportionate share of the burden onto the backs of the poor, the elderly and the battered middle class.
What is the alternative? Well, we could begin by recognizing that while spending is too great, in historical terms, revenues are far too meager. We ought to be taxing and spending at roughly 20 percent of GDP, which means that a sensible, equitable, long-term program of debt reduction ought to include spending cuts and revenue increases in roughly equal measure.
Start by allowing the Bush-era tax cuts for households making more than $250,000 a year to expire; this would cut deficits by about $700 billion over a decade. Add in the revenue that would be gained by closing the tax loopholes that Obama keeps talking about — eliminating some deductions for high earners, requiring hedge fund executives to pay taxes at the same rate as their chauffeurs, eliminating the tax break for corporate jets, and so on — and soon you're in the neighborhood of a trillion dollars.
The nominal corporate tax rate of 35 percent is a joke, since big corporations don't actually pay that much; those loopholes, too, could be eliminated. Then we could look at measures that would have broader impact — say, hiking or eliminating the income cap for Social Security payroll contributions.
The point is that it doesn't take much imagination to get within shouting distance of $2 trillion in deficit reduction over 10 years — looking at the revenue side alone. That's half of the $4 trillion that both Republicans and Obama have set as a target.
There would have to be an equal amount of spending cuts. But what sense does it make to begin with the small slice of the pie — less than 20 percent — that is being called “discretionary” spending? It's just not possible to find enough savings there.
The drivers of out-of-control federal spending are medical costs and the Pentagon budget. Leave aside health care for the moment and reflect on the fact that military spending has roughly doubled since 2002. Are we twice as safe? Can we really afford to spend two-thirds of a trillion dollars on defense every year?
If we could trim the Pentagon's spending by 15 percent — I know I'm dreaming, but humor me — we'd save another $1 trillion over 10 years.
Then it would make sense to look at medical costs. Opinion surveys and election results confirm that Americans want a government that provides health insurance for senior citizens and the poor. If this is what we're going to continue to do, and if we're not going to break the bank, then we need to take another whack at bringing costs down.
It's impolitic to mention this fact, but other developed nations manage to produce better health outcomes for roughly half of what we're paying. They do this through single-payer health systems, many of which deliver care via private health insurance companies. American exceptionalism is to be celebrated when, as in many cases, it gives us an advantage — our traditional openness to immigration, for example. But what's the point of being exceptional in areas where we've clearly fallen behind?
There is, indeed, a way to eliminate these strangling deficits with fairness and an eye toward a brighter future. It just happens to be the progressive way.