Famous Fomenters of Fiscal Fear

Illustrate it with a girl tied to railroad tracks, the steam locomotive barreling toward her, and pianoforte agitato, while Professor Krugman sums up the story to date in a paragraph:

"Republicans engaged in unprecedented hostage-taking, threatening to push America into default by refusing to raise the debt ceiling unless President Obama agreed to a grand bargain on their terms. Mr. Obama, alas, didn't stand firm; instead, he tried to buy time. And, somehow, both sides decided that the way to buy time was to create a fiscal doomsday machine that would inflict gratuitous damage on the nation through spending cuts unless a grand bargain was reached. Sure enough, there is no bargain, and the doomsday machine will go off at the end of next week."

What do we do? What do we do?!

"The right policy would be to forget about the whole thing. America doesn't face a deficit crisis, nor will it face such a crisis anytime soon."

As compared to, say, the notion from the nice president of the University of Idaho introducing the Symposium on Federal Fiscal Issues with a panel of Very Serious People in Boise this week:

"There's no greater issue facing our nation, Congress and our President than the federal deficit and our national debt."

Truly, the sky is falling. Idaho Representative Mike Simpson said it will fall in the next 90 to 180 days. He was among the purported "leading experts" in the panel of five, comprising three current politicians, one former politician and now gadfly, and the president of the Committee for a Responsible Federal Budget. The CFRB's oversized board includes Alan Simpson and Erskine Bowles, and Maya MacGuineas' bio suggests "pundit amplifier" more than expert, but give her a chance.

Moderator Greg Hahn sums up how we got here: entitlements are expanding to contain the senescence of the Baby Boom, and we lowered taxes a ton. Then over the top: with our debt having expanded to about the size of our GDP, we're now

"among the most leveraged countries in the world, up there with Ireland and Mauritania, the Ivory Coast, and we've got an eye on the big ones, Greece and Japan."

Can you point to Mauritania on a globe? I'm not sure where to start looking, myself. Its GDP per capita in 2010 was a bit over US $2,000, as compared to $47,300 in the U.S. Cote d'Ivoire's was under $1,700. The other three countries he mentions at least have per capita GDP in the mid-5 figures, and yes, Japan's economy is the third largest in the world (albeit 5th in the CIA's estimate of GDP purchasing power parity, for which we're in a dead heat with the EU, and the other four countries combined are about our rounding error).

Biggest threat forever! says Mike Crapo. Threatens the American dream. We can't do nothing. The bond markets are coming after us. Someday soon. Rep. Simpson says "We have to make some very difficult choices." "It may cost every member of Congress their jobs." If only! Gadfly Simpson, speaking in the royal we for Erskine and himself,

"We've succeeded beyong our wildest dreams already, because we've effectively pissed off everyone in America."

Nothing like a tall clown, I'll concede that. And thank goodness Mike Simpson cracked a smile, he looked like the raisin of worry. Sen. Mark Warner (D-VA) provided a more detailed synopsis of how we got where we are:

"Both parties had plenty to do with it. On the revenue side, we cut taxes four and a half trillion dollars over ten years."

And five things on the spending side:

  1. doubled defense spending
  2. created a whole new category of spending called "homeland security"
  3. went to war not once but twice, entirely on the credit card
  4. we created a whole new entitlement, Medicare Part D (with "not a dime paid for")
  5. we're actually staying alive for retirement

MacGuineas: This country is at the point where our debt levels are really already doing damage,

"so high that the evidence out there implies that the economy's not growing as fast as it otherwise could be because we've already borrowed so much. ... We're not going to have a vibrant economy until we quit borrowing so much. If we don't make some changes soon, we risk that there's going to be some kind of crisis."

Which is to say some evidence implies that the sky might be falling a little bit already. Watch your head. And the cri de coeur of uncertainty, declichéd as a lack of "stability."

"Nobody can plan, nobody can invest. Nobody knows what's around the corner. There is a real political threat right now, which is 'are we going to be able to govern?'"

Perhaps the most important question of the evening. No one suggested the answer was "yes," but everybody agreed we really, really need to do that governing thing.

That brought us to Sen. Crapo and Rep. Simpson summarizing how we've come to the sequester: "it's a stupid way to cut budgets." (Warner: "the single stupidest way possible." Think new Sheriff taking himself hostage in Blazing Saddles, Warner suggests, which is funny on more levels than this well-dressed crowd could react to; take a refresher, I'll wait. In the movie, the Sheriff's ploy worked brilliantly, but then that was a comedy, and this is prelude to tragedy.)

Simpson avers "we've been keeping pretty good control" of discretionary spending, which is what will get "evenly" whacked, while nothing is being done about entitlements, which this group says is the real problem. But then he also said the sky was going to fall in "90 to 180 days," which when it comes to entitlement spending reform is, I'm sorry, crazy talk.

Sen. Simpson refers to his sidekick as "Erskine" and speaks freely for their apparently shared consciousness in a royal plural. "We never dreamed that they would go to sequester." It will be oh so painful. "The first thing you'll notice is you'll be standing in an airport security line for about three hours." Unless of course I don't actually go to the airport, then I won't notice that so much.

"I'm tellin' you the shrieking and howling from the AARP and the senior groups is embarrassing to me, I'll tell you that," and he'll press his thin lips together in a straight line to punctuate the tell with an inimitable "hey you kids get off my lawn" curmudgeonly flair. "And I have to listen to this crap," he says in his grumpy gus schtick. I feel your pain, Senator, even as you speak. Some people find him charming, I don't understand. Good on Greg Hahn for fishing some applause up to make the old guy feel better. (Unfortunately, that'll probably just encourage him.)

MacGuineas: "We have to stop jumping from one of these crises to another." Yes. How? What? Anyone?

Fix the tax code. Yes. (When's that going to start?)

Rep. Simpson notes that "none of those provisions are in the tax code because people came to Congress and said 'this is a really stupid idea, but let's do it anyway." So, unlike the sequester. Then the obligatory livestock references, trying to remove anyone's sacred cows will make them "squeal like stuck hogs."

Start over. Clean sheet! Gadfly Simpson: "What we said is get rid of them all, there are 180 of them." Only 180? After you get rid of all the deductions, put in your new simple system lickety split:

"then from zero to 70 grand you pay 8% income tax, from there on up to 210, you pay 14, then from over that you pay 23, and you take the corporate rate to 26 and 36 and go to a territorial system where you don't get it taxed when you bring it back in."

Crapo notes that any piecemeal approach is politically unachievable. So Simpson/Bowles clean sheet, start over is the right way, and then build things back in "on policy grounds." I'm all in favor, for the economic efficiency of everyone spending less time doing tax returns. If it's part of the solution to our deficit and debt problem, it means increased revenue, too, which nobody really talked about, and sshhh, because that'll queer the deal. But look back at "how we got here," and it involves lowering tax rates dramatically while not changing the course of our spending.

Sen. Warner says "we don't have to fix [all these problems] overnight." Thank you. And we need to stop running the federal government on continuing resolutions. Starting right... when?

February 23, 2013