Free Markets, Free People
Competing Visions: Why The Super Committee Failed
As Bruce points out below, the failure of the Super Committee should come as no surprise to anyone who was paying attention. Even where committees arrive at an agreed solution, it rarely ever gets implemented. What’s worse, in this case, the Super Committee was operating under the sword of automatic spending cuts to domestic and military programs should it fail to arrive at a consensus — i.e. no side had any incentive to deliver more or less than what would automatically go into place anyway. Of course, Pres. Obama running a re-election campaign based on a “do nothing” Congress certainly didn’t inspire his Democratic brethren on the Super Committee to find common ground either.
But these aren’t the real reasons for the Super Committee failure. Instead, as Jeb Hensarling (R-TX) writes in the Wall Street Journal today, the underlying problem is one of ideological impasse:
Ultimately, the committee did not succeed because we could not bridge the gap between two dramatically competing visions of the role government should play in a free society, the proper purpose and design of the social safety net, and the fundamentals of job creation and economic growth.
For the members of the Super Committee, the choice seemed to be between raising taxes on a small percentage of earners and making no cuts or reforms to the shibboleths of Medicare and Social Security, or reducing taxes and modestly curbing entitlements at some point in the future. In other words, it was a choice between expanding or slightly retarding the growth of government. However, it’s not just the specifics that make compromise difficult, if not impossible. Where one side believes that government is always the answer to what ails us, and the other (at least nominally) operates from the premise that individual effort leads to greater prosperity for all, there is only so much compromise that can be reached between the two. Eventually, government will be either too small or too big for the other side to bear.
This is the crucible in which somehow a compromise was to be reached on federal spending.
As it stands now, government spending is equal to about 35% to 40% of GDP, while our national debt is around 100% of GDP. At the federal level, we are borrowing 40 cents of every dollar that we spend, and entertaining trillion dollar plus deficits year after year for as long as we can reasonably forecast. This is the vision of those who see government as playing the primary role in most every aspect of society since it costs a lot of money to execute that vision. Yet, despite the fact that government has done nothing but grow over the past sixty years, they are convinced that anything smaller than what we currently have will lead to economic and social ruin. To be sure, after finally getting the government foot in the door of universal health care, the liberal base is not about to countenance any willing walk-back on those gains. The Democrats on the Super Committee were well aware of this, and that accepting changes to Medicare and Social Security or any other dearly loved social program would result in a deep backlash from those who believe that all of life is dependent on government.
Opposing that vision are those who think that government should be smaller and less intrusive, especially with respect to our economy. They look at our ever-growing debt and anemic, if not illusory, economic gains and see nothing but trouble down the road we’re traveling. Unfortunately, while total government spending is often publicly recognized as the problem, too many of these visionaries think that simply reducing tax rates will flood the federal coffers and all will be right with world. It’s true that raising taxes in a declining or struggling economy will tend to exacerbate, not alleviate, the problem. But Republicans on the committee also know that their base stand ready to punish any member who suggests raising taxes, now or in the future, regardless of the fact that the spending cuts necessary to get our debt problems under control simply aren’t feasible. And they won’t have much better luck at the ballot box if they even hint at reforming Medicare or Social Security.
Even where they are willing to take that chance, however, the Democrats can’t politically afford to compromise:
The Medicare reforms would make no changes for those in or near retirement. Beginning in 2022, beneficiaries would be guaranteed a choice of Medicare-approved private health coverage options and guaranteed a premium-support payment to help pay for the plan they choose.
Democrats rejected this approach but assured us on numerous occasions they would offer a “structural” or “architectural” Medicare reform plan of their own. While I do not question their good faith effort to do so, they never did.
Republicans on the committee also offered to negotiate a plan based on the bipartisan “Protect Medicare Act” authored by Alice Rivlin, one of President Bill Clinton’s budget directors, and Pete Domenici, a former Republican senator from New Mexico. Rivlin-Domenici offered financial support to seniors to purchase quality, affordable health coverage in Medicare-approved plans. These seniors would be able to choose from a list of Medicare-guaranteed coverage options, similar to the House budget’s approach—except that Rivlin-Domenici would continue to include a traditional Medicare fee-for-service plan among the options.
This approach was also rejected by committee Democrats.
The Congressional Budget Office, the Medicare trustees, and the Government Accountability Office have each repeatedly said that our health-care entitlements are unsustainable. Committee Democrats offered modest adjustments to these programs, but they were far from sufficient to meet the challenge. And even their modest changes were made contingent upon a minimum of $1 trillion in higher taxes—a move sure to stifle job creation during the worst economy in recent memory.
Even if Republicans agreed to every tax increase desired by the president, our national debt would continue to grow uncontrollably. Controlling spending is therefore a crucial challenge. The other is economic growth and job creation, which would produce the necessary revenue to fund our priorities.
Meanwhile, we operate under a tax system that is so heavily skewed towards the highest income producers that our government is dependent on about five percent of the taxpayers for a majority of its revenue, and only a quarter of all tax payers for more than 85% of that revenue. To the Democrats, this is apparently a good start. Republicans, on the other hand, see an unfair system that, if properly reworked, could raise even more revenue. Either way the spending, and thus the government, grows.
The definition of “priorities” is the real sticking point. It means either that everything from price and income support to cradle-to-grave health care is a priority, or that only the basic structural necessities of national defense, courts of law and last-resort safety nets qualify. There has been a great deal of compromise on that definition over the past several decades (albeit, always resulting in an expanding government), but it seems that we’ve finally reached the limit where any further acquiescence by one side results in unbearable loss to the other side. It’s difficult to see how we can successfully move forward as a unified country with such diametrically opposed visions for the role of government. Indeed, maybe we can’t for very much longer.