The End of Tax and Spend
We appear to be at the end of a rhetorical era. For 30 years or more, at least since the Reagan years we have had rhetoric against “tax and spend” government. The traditional accusation has been that liberals would impose a vast spending agenda on the backs of the taxpayers. To some extent the rhetoric has framed budget issues and affected the political dynamic, with both parties for a long time keeping spending somewhat aligned with some baseline of revenue. During the economic growth period of the Clinton years government spending could grow while taxes did not rise, and the federal deficit was greatly reduced. During the Bush years tax cuts caused the deficits to grow, but appearances were that the deficits were related to defense.
No more. President Obama has changed the paradigm, broken the Gordian Knot. There is no more “tax and spend” because we have done away with the “tax” part. The President has successfully preached that the economic situation is a crisis of a scope only surpassed by the Great Depression. With that rhetoric as background the President and the Congress have de-coupled government spending from any obligation to pay for it. The news has reported a $15 million contract to renovate a Montana border post which boasts an average of 2 cars per day. The Congress has spent $1 Trillion in benefits and corporate subsidies in 2009 and is working on another $1 Trillion in health care. If there is a limit I don't see it.
The key, however, is the still-new concept of budgeting by spending only as opposed to budgeting by balancing spending against revenue. In 2009 we have undertaken an additional trillion or so dollars of unfunded debt, much of it being programmatic spending which will have to be spent again each year, such as federal education aid which is in no way a one-time expense. For the first time we are borrowing long term funding to pay for current operating costs, and the federal government is pledging long term credit to pay state governments’ current expenses. All while the President says that taxes will be reduced for 95% of Americans.
In retrospect the 2008 TARP program to rescue Wall Street was probably a key to a new spending paradigm. If hundreds of billions of dollars can be paid to investment bankers with bonuses in the millions each year, who can require restraint for any other cause, particularly worthy causes? And if the taxpayers are not affected because we just borrow the money then who will object?
Some old-fashioned Cassandra might believe that trillion dollar annual deficits are a Trojan Horse to our economic health. Maybe so, but maybe not. Maybe we can just spend and borrow from China to pay for it for a long time. We haven’t tried it before.
No more. President Obama has changed the paradigm, broken the Gordian Knot. There is no more “tax and spend” because we have done away with the “tax” part. The President has successfully preached that the economic situation is a crisis of a scope only surpassed by the Great Depression. With that rhetoric as background the President and the Congress have de-coupled government spending from any obligation to pay for it. The news has reported a $15 million contract to renovate a Montana border post which boasts an average of 2 cars per day. The Congress has spent $1 Trillion in benefits and corporate subsidies in 2009 and is working on another $1 Trillion in health care. If there is a limit I don't see it.
The key, however, is the still-new concept of budgeting by spending only as opposed to budgeting by balancing spending against revenue. In 2009 we have undertaken an additional trillion or so dollars of unfunded debt, much of it being programmatic spending which will have to be spent again each year, such as federal education aid which is in no way a one-time expense. For the first time we are borrowing long term funding to pay for current operating costs, and the federal government is pledging long term credit to pay state governments’ current expenses. All while the President says that taxes will be reduced for 95% of Americans.
In retrospect the 2008 TARP program to rescue Wall Street was probably a key to a new spending paradigm. If hundreds of billions of dollars can be paid to investment bankers with bonuses in the millions each year, who can require restraint for any other cause, particularly worthy causes? And if the taxpayers are not affected because we just borrow the money then who will object?
Some old-fashioned Cassandra might believe that trillion dollar annual deficits are a Trojan Horse to our economic health. Maybe so, but maybe not. Maybe we can just spend and borrow from China to pay for it for a long time. We haven’t tried it before.
posted by Contraria | 8:58 PM
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