By James Kwak
(Warning: Very elementary post ahead. Most of you probably know all this already.)
Mitch McConnell, Senate Republican Leader, quoted in Bloomberg: “We have seen the consequences of giving Washington a blank check. My message to the president is simple: It’s time for Washington to focus on fixing itself. It’s time Washington take the hit, not the taxpayers.”
That sounds good (if you don’t like “Washington,” that is), but what does it mean? McConnell wants people to think that their tax dollars go to feed some animal named “Washington,” and therefore our budget problems can be solved by simply feeding Washington less — without “taxpayers” taking the hit.
That might be true if “Washington” simply consumed money for its own sake, but the problem is that most of the federal budget isn’t consumed by the federal government.
Of the $3.8 trillion in outlays in President Obama’s proposed FY 2012 budget, more than half comes in one door and immediately goes out another door back to ordinary people, the vast majority of whom are or were previously taxpayers. $742 billion gets paid out in unrestricted cash by Social Security; another $762 billion goes to pay for people’s health care expenses. Other entitlement programs such as retirement benefits for federal employees (civilian and military), food stamps, and unemployment insurance add up to another $716 billion.* There’s no way to reduce this spending without directly hurting “taxpayers.” You can argue that some of these programs should be eliminated, but you can’t argue that you can eliminate those programs without hurting ordinary people.
Another $207 billion goes to pay interest on the outstanding debt. There’s no way to reduce this spending without triggering a massive financial crisis, which would ordinarily be unthinkable.
Of the rest, almost two-thirds goes to pay for national security. Mitch McConnell might be open to cuts in defense spending, although I doubt that he’s come out and said so.
That leaves only $507 billion for discretionary, non-security programs. To start off with, this is less than a third of the projected 2011 deficit, so even if you think that all of it is money wasted on bureaucrats who do nothing, you still can’t balance the budget on their backs. (And besides, they are “taxpayers,” too — so shutting down the government is just a way of concentrating the pain on federal government employees.) And even there, a lot of that $507 billion simply flows right out to ordinary people (not federal employees): educational grants through the Department of Education, low-income housing vouchers through the Department of Housing and Urban Development, farm subsidies through the Department of Agriculture, and so on.
So what is “Washington”? You might legitimately believe that the Environmental Protection Agency provides no value to society and should be entirely eliminated; I don’t, but at least that position is logical. But that would only save you $10 billion. Alcohol, Tobacco, and Firearms? $1 billion. You can also believe that some of the services provided by the government could be provided more cheaply by the private sector; but even if the government stopped providing those services, you would still have to pay someone something for them. The truth is, there is no animal named “Washington” that eats money. Most of what Washington does (in dollar terms) is write checks to people, so reducing a dollar of Washington’s spending generally takes a dollar, or close to a dollar, out of someone’s pocket.
And the Republicans know this. Much as they would love to kill EPA, ATF, CFPB, and the like, they know that is peanuts. That’s why Kevin McCarthy, the third-leading Republican in the House, “insisted that limits on Medicare must also be included in a bipartisan deal,” according to the same Bloomberg article. It’s very clear that “taxpayers” — in this case, Medicare recipients — are going to get hurt in any budget-cutting deal. The only question is which ones.
Saying “it’s time Washington take the hit, not taxpayers,” is not the only part of the Republican position that flies in the face of logic. The other part is the refusal to consider tax increases, especially when they are defined to include all revenue increases.
According to Bloomberg, Eric Cantor walked out of debt negotiations because he opposed administration revenue-raising proposals such as eliminating last-in, first-out (LIFO) accounting for inventory costs and ending subsidies for oil and gas companies. Now, you may or may not think that subsidies to oil and gas companies are good policy (theoretically, they promote exploration, which theoretically reduces our dependence on foreign sources). But your willingness to consider eliminating such subsidies should not depend on whether those subsidies are effected as cash payments by the government or as loopholes in the tax code.
This, of course, is the old tax expenditure issue. Anything the government can do by spending, it can also do (though perhaps not as efficiently) by granting a tax exemption. By Cantor’s logic, if the government were awarding cash bonuses to oil companies, he would be open to eliminating those bonuses; but since instead the government awards tax goodies (such as accelerated deductions) to oil companies, those goodies must be off the table.
It bears repeating that this is not an issue of what is or is not good policy. You could say the same thing about the subsidy for dependent care: because it’s implemented as a tax credit instead of as a spending program, it’s off limits to the House Republicans. Whatever your views are on the actual policies, it’s absurd to base your deficit-cutting strategy on whether they are labeled as spending programs or as tax goodies.
But it’s also absurd to think that the federal government exists independently from the American people. Really it’s a kind of fetishism: in Wikipedia’s words, “the attribution of inherent value or powers to an object.” Apparently some people have hated the government so long that it has become a kind of magical totem in their minds.