Washington's Phantom Austerity

Fiscal Cliff negotiators will means-test everything except government.


Here's just how stubborn the growth of government is: Even after a Democratic president wins office by campaigning until Election Eve on a "net spending cut," even after he gives his first proposed budget the humblebragging title of "A New Era of Responsibility," even after both Barack Obama and Federal Reserve Chairman Ben Bernanke describe the country's long-term budget outlook as "unsustainable," even after a populist, anti-government backlash sweeps the land for a year and a half, culminating in the Republican re-taking of the House of Representatives and the rise of a new type of limited-government politician embodied by Rep. Justin Amash (R-Mich.) and Sen. Rand Paul (R-Ky.); even after those forces collide in a series of high-profile debt-ceiling showdowns…after all this stomach-churning sturm und drang over the size and scope of government, the federal bureaucracy still has yet to be cut. And no matter what anyone tells you, it won't be any time soon.

Former president Bill Clinton made a big splash at the Democratic National Convention by talking up the virtues of simple budget "arithmetic." (Less ballyhooed is that—virtually alone among speakers there—Clinton also warned that "We've got to deal with this big long-term debt problem or it will deal with us.") In that spirit, and particularly since many Democrats believe that their victory Nov. 6 was a validation of truth vs. lies, let's introduce a bit of simple fiscal-cliff math of our own:

In fiscal year 2000, Clinton's last as president, the federal government spent $1.77 trillion. Multiply that number by two, and you're almost to federal spending in FY 2010: $3.72 trillion in Obama's first wholly owned budget. If we had limited government's growth—not actually cut government, mind you, but limited its growth—at the rates of inflation and population-expansion, the 2010 federal budget would have been a much more affordable $2.50 trillion. Instead of "fiscal cliff" on Jan. 1, 2013, we'd be facing a federal budget surplus.

Faced with the overwhelming evidence that the debt and deficit problem is definitionally a spending problem, negotiators and commentators are talking about everything except cutting the size of government.

And yet no lawmaker in the fiscal cliff negotiations is actually talking about cutting government. The very sequestration "cuts" that Washington is freaking out about will not, it can't be stressed enough, lead to a net reduction in the size of government. Even the estimated $110 billion in trims currently slated for 2013 can and probably will be easily offset by war spending, post-Sandy relief, and whatever other goodies Congress hoses through the massive spending-cap loophole.

Lead dealmaker Timothy Geithner portrays the problem as finding "the revenue increases we need," a formulation that takes as axiomatic the federal government's requirement to gobble up at least $3.8 trillion a year. (Geithner, like many Keynesians, seems to forget that the master's advice was to eventually cut spending after the crisis of slack aggregate demand has been lifted.) What the few Democrats who signal a willingness to even talk about entitlement reform say in their next breath is that specific reforms should not be part of any fiscal cliff deal. Republicans don't have much in the way of entitlement-reform proposals to begin with, aside from the mild measure of means-testing Medicare for the rich. You can read many thousands of words about the negotiations without hearing even a hint about cutting a single government program, let alone agency or department.

So Republicans want to means-test entitlements and maybe some tax deductions, and Democrats want to effectively means-test taxes. Where does that leave those of us who would prefer instead to at long last means-test government?

Screwed, is the short answer. Americans of every income group will likely take home less of their pay, an arrangement that will probably be significant enough to push the fragile economy into a double-dip recession, but too small to meaningfully close the deficit. Washington's chronic short-term crisis-budgeting—with its annual "patches," squandered oversight, and studious entitlement-avoidance—will likely become a permanent feature of Obama's presidency.

The only long-term fix to this scenario has to begin at the ballot box. It will only be when enough voters express a desire to cut government, rather than simply cut taxes, that we can be sure that at least some of the negotiators on Capitol Hill will be willing to address the problems at hand.

Until then, the only grim consolation prize will be that more Americans will come to realize that the true cost of our current size of government is more stupid politics and protracted recession.