In Deficit Debate, Principles Do Matter
First Things: Plans to solve our out-of-control debt problem keep proliferating. But amid the welter of competing forecasts and estimates, Republicans should remember: your principles matter more than the numbers.
As the clock ticks down on their phony deadline for concluding deficit talks, the Democrats have lost all the public debates over more spending and higher taxes.
So their only hope is to manufacture a fake crisis, such as the supposed "default" date of Aug. 2, and with the media's help, force Republicans to agree to a bad deal.
It wouldn't be the first time.
In 1990, President Bush engaged in "crisis" talks over deficits. He broke his "no-new taxes" pledge, agreeing to a "deal" that included $2 in spending cuts for every $1 in tax hikes. Bush lost his job, and it took three years and a new Congress to undo the economic damage.
Today, in the meat grinder that is Washington politics, pressure will inevitably grow for a "fair and balanced" deal - that is, for the GOP to capitulate. Republicans should stay true to these conservative principles:
• No new taxes. The economy's expansion and jobs recovery is the worst since the Depression. More than two years after the recession's end, we still have 9.2% unemployment - and close to 30 million willing workers who can't find full-time jobs.
As such, hiking taxes by $1 trillion to more than $3 trillion over the next 10 years, as Obama has suggested, is unconscionable. It would do lasting damage to our economy and perhaps even cause a new recession.
• Government must get smaller. President Obama and the Democrat-led Congress have expanded the scope and reach of the federal government to unprecedented levels, thanks to: ObamaCare; Dodd-Frank; stimulus; government takeovers of GM and Chrysler; a no-drill, green energy policy, and TARP.
Democrats now want to make this expanded superstate permanent - turning the U.S. into another debt-ridden, stagnant colossus, like Europe or Japan. From 20% of GDP just five years ago, the federal government today spends 25% of all U.S. output. By 2035, without entitlement reform, it will hit 35% or higher.
Enough. Big Government shouldn't take $1 or more out of every $4 the private economy creates. Any deal to raise the $14.3 trillion debt ceiling must shrink government below its long-term average of 20% of GDP.
• The debt must shrink. That it has spiked from $9.8 trillion in 2008 to $14.3 trillion now is alarming. A 2010 study of 20 rich countries by economists Carmen Reinhart and Ken Rogoff found that a nation starts to struggle when its debt-to-GDP ratio rises above 90%. Ours is now above 100% - putting us in the same company as Greece, Italy, Ireland, Spain and Portugal.
GOP negotiators should keep these basic budget principles in mind If not, they'll find, as Bush did, that American voters have long, unforgiving memories.
