Nancy Pelosi has announced that there is a 100 percent chance of a government shutdown in December or January, as the deadlines built into the deal that reopened the government approacheth.
Not in so many words per se, but her message about where House Dems and, one assumes, her ideological confreres in the Senate stand on budget negotiations is loud and clear: There's no budget deal without new taxes.
The Hill notes that "President Obama has reportedly signaled an openness to tackle the across-the-board cuts without hiking taxes." Pelosi has other ideas:
"Our position is that we're going to the table in order to reduce the deficit, grow the economy, create jobs, end the sequester — revenue needs to be on the table," Pelosi said during her weekly news conference in the Capitol.
"You can't just take a piece here [and] a piece there; it has to be comprehensive," she added. "And if you're not going to have revenue, who's going to pay? Granny on Medicare? That's not something we can accept."
As it happens, forcing Granny—and Pappy too!—on Medicare to pay more and get less would be a great way to drive down current and future spending (having everyone pay less and get less would be even better!).
Medicare, which pays for health care of seniors, and the old-age portion of Social Security already account for 37 percent of annual federal expenditures and are projected to soak up 50 percent of all outlays by 2030. And before we start talking about old people eating cat food and re-using paper towels, remember that households headed by the 65-plus crowd are half as likely to be in poverty as those headed by someone 35 and younger. The reason? Senior households have 47 times the amount of wealth held by 35-and-younger broods.
That's good news in many ways, but it reflects more than a traditional accrual of assets over a lifetime of work and savings. It reflects the whopping share of all entitlement spending directed to retirees—53 percent, which is far more than the disabled or poor people get. Given that Social Security is already giving most workers who've retired since 2010 negative returns on the payroll taxes they paid into the system, it seems fair that older folks should be taking the haircut this time around. [For more details on the "Generational Warfare" that is already being waged against relatively poor and young people, read this.] The plain truth is that Granny and Pop-pop on Medicare have more pocket change than the rest of us.
But to bring it back to Pelosi's insistence that any sort of budget deal is going to have to include new taxes: Here's hoping the Republicans—and President Obama—hold firm against any such palaver.
Fact is that Obama got tax hikes in the fiscal cliff deal, even as he locked in most of the Bush-era rates. The payroll tax holiday ended and top income earners pay more now than a year ago.
Partly thanks to that and even moreso to a mildly recovering economy, the feds took in a record-high $2.8 trillion in taxes during fiscal 2013, $325 billion more than than they did in 2012.
Because of sequestration and the inability to pass a full-on budget for five years, spending has stayed flat over that time, sorta delivering on the premise of my and Veronique de Rugy's "19 Percent Solution" to balance the budget (that 2011 article essentially argued that keeping spending flat and taxes at then-current rates for 10 years would balance the budget). Indeed, the past two years mark the first time since the mid-1950s that federal spending has dropped two years in a row.
All told, last year's deficit came in at $680 billion—still a huge amount, yes, but the first time in Obama's presidency that it's been less than $1 trillion.
But we've seen this movie before, right? The minute that deficits start to dip and revenues creep up, it's time to celebrate by…going on a spending binge, preferably accompanied by tax hikes. Folks such as Pelosi are like fatsos on a diet who celebrate a week's weight loss with a trip to the Cheesecake Factory. They are ready to undo any sort of fiscal discipline the minute they can.
While defense spending can and should be cut massively, just about everybody budget watcher agrees that it's entitlement spending what's bankrupting the country. Under CBO projections, revenue under current rules will rise over the next 25 years to above the historical average of 17.5 percent of GDP, so the tax side of things isn't the issue here (indeed, exactly why the feds need revenues equal to 19.5 percent of GDP is a case that really needs to be made). And most stimulatarians—whether of the Keynesian or monetarist persuasion—would agree that hiking taxes is a great way to stall out an sluggish economy. That leaves spending on the table. And lord knows that after the deficit-busting, debt-boosting bender that has been the Bush-Obama years between 2001-2011, there's more fat to cut now than ever before.
So here's hoping that when December 13 rolls around—and the start of discussions of "a long-term blueprint for tax and spending policies over the next decade" – Obama and Boehner recognize that they are now officially each other's BFFs.