Op-Ed: Why GOP Agenda Could Make Things Worse
CNN Money | January 10, 2011
Commentary: Maya MacGuineas is the director of the fiscal policy program at the New America Foundation.
There's a new sheriff in town -- at least in the House -- and things already feel different.
The focus is on cutting spending, repealing last year's health care law and controlling the debt.
But it's not at all clear that things are headed in a better direction from the budget's perspective.
Even if the political promises don't fizzle and the Senate follows along, implementing the new agenda might not help the nation's fiscal situation. It could even hurt it.
Spending cuts: A good start
Government spending has grown from an historical average of 21% of GDP to 24% the past few years due to the recession. There is a very serious risk that these new spending levels will become the "new normal."
Luckily Republicans have refocused the conversation to bringing spending back to pre-recession levels. With the recovery on track, the time has come for a massive spending overhaul that scales back, consolidates and eliminates programs wherever possible.
That said, the Republican approach is preposterously limited. They say they will focus only on annually appropriated spending for programs outside of defense, security and veterans.
For starters, security spending is one of the most bloated areas of the budget. Budget experts don't even know the number of contractors on the payroll, and defense spending has become as much about regional job development as security. Military compensation and health insurance are screaming to be overhauled.
To ignore defense spending is like dieting by cutting out carbs but still binging on sugar.
Moreover, the largest cuts need to take place in Social Security, Medicare and Medicaid. All three entitlement programs are growing faster than the economy as a whole.
Yet the Republican leadership is silent on cutting defense and the big entitlements.
Let's hope this is the beginning of a thoughtful spending cut agenda -- done with an eye to the economic and human effects but pursued more aggressively than the Republican leaders have so far laid out.
Repeal health reform: A mixed bag
The Republican push to repeal the health reform law is more complicated.
The law is problematic. It will funnel more money, not less, to health care. It will also increase the burden on the federal government.
Given that the reforms were sold as a way to control costs, it is unforgivable how far they fall short of what is needed. The law creates a massive entitlement program, the cost of which is covered through gimmicks or offsets that should have been used to pay for the existing unfunded health care obligations. (By the way, my criticism of the health care law doesn't mean I don't believe in the goal of expanding coverage. I do.)
On the other hand, the Patient Protection and Affordable Care Act has a number of important cost-saving measures that should be expanded, not repealed. New innovations such as a commission to help cut Medicare costs may be tough medicine, but they are exactly what we need to help fix the budget.
Health reform needs to be reformed -- not repealed. The goal should be to keep the cost-saving measures in place and add others. The risk is that the costly parts of the bill will remain intact and the ones that help control costs will be chucked.
Free passes for tax cuts: Bad idea
This is where the Republican promises really start to fall flat. The party's pledge rightly points to the threats posed by excessive government debt:
"We now borrow 41 cents of every dollar we spend, much of it from foreign countries, including China, and leave the bill to our kids and grandkids."
"Within three years, our government will spend more than $1 billion a day just to pay the interest on our debt."
Ah, good points.
And yet the House last week passed a set of budget rules that are likely to make the situation dangerously worse. Pay-as-you-go rules have been replaced by "cut as you go" rules. So-called cut-go requires that all new mandatory spending be offset with cuts, but tax cuts, which reduce revenue, don't have to be.
Listen, I get that House Republicans think spending is the problem -- so do I. But this is nuts.
If they think federal debt is headed toward dangerous levels, allowing increases in that debt from things they like (tax cuts) doesn't somehow make those debt levels any less dangerous.
Policies that exempt tax cuts from budget constraints are not only economically dangerous, they are cowardly.
Those who want smaller government should welcome paying for tax cuts with spending cuts. It's a win-win.
It was irresponsible not to offset the 2001 and 2003 Bush tax cuts with spending cuts of an equal amount. It would be irresponsible to engage in more tax cuts without corresponding spending cuts.
So we'll see. Let's hope that in a few years that estimate of $1 billion a day in interest hasn't gotten even worse.