Last weekend, David Ignatius made a vital contribution to the debt and deficit debate: “Take the deficit pain now. It’s a truth of economics and life that if you have bad news coming, take the hit early and get it behind you. You can’t start building until the debris is out of the way.” Mr. Ignatius offers various examples from history. For example, Fed Chairman Paul A. Volcker’s 1979 interest rate hikes caused the recessions of the early ‘80s, but broke the inflation psychology and (I would add, with Ronald Reagan’s policies) built the foundation for 25 years of prosperity.
Mr. Ignatius concludes: “What’s crazy in this budget season is the hope that you can buy some relief with just a little harsh medicine. To quote Shakespeare’s “Macbeth”: “If it were done … then ‘twere well it were done quickly.”
Measured by the “Ignatius standard,” I would argue that only the Republican Study Committee (RSC), chaired by Rep. Jim Jordan of Ohio, has offered a budget that gets the job done in time. President Obama’s latest proposal just keeps adding debt, deficits and taxes forever, and even Budget Committee Chairman Paul Ryan’s budget - now the official budget of the House of Representatives - takes a generation of further debt and deficit before eventually getting to balance.
The RSC budget would get us to balance by 2020. It would do so by cutting spending rationally in the regular operating budget of the government, keeping discretionary spending at 2008 levels of $933 billion beginning in 2013 (including trimming defense spending at the levels recommended by Secretary of Defense Robert M. Gates), reducing Medicare, Medicaid, Social Security and other entitlement spending - and by not raising taxes.
First, consider the futility of tax increases for the rich making a real dent in deficits. As the RSC points out, the Government Accountability Office has determined that the “entitlement shortfall - the difference between planned spending and the revenues coming in - is equal to $88.6 trillion.” The Congressional Budget Office estimates that by 2025, current-level spending on Social Security, federal health care programs and net interest will consume “every single dollar of revenue the federal government collects.”
And now consider the paltry amount of money we could get from taxing “the rich,” as analyzed by economist Walter Williams: “If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would yield … $1.4 trillion.” If the government took 100 percent of the yearly profits of all the Fortune 500 companies, it would be only $400 billion. If the federal government confiscated all the property of the country’s 400 billionaires (down to their last set of cuff links and children’s baseball mitts), it would yield only $1.3 trillion. And, of course, that would be a one-time collection because after all their of assets were confiscated, the billionaires would be broke. Together, all the “rich” people’s income and assets could not balance the budget for long.
No, the key, the unavoidable hard choice, is to reduce overall costs of the entitlements. It is on this point that the RSC budget makes the obvious, essential, inevitable - but still beyond the political pale - proposal to slowly and humanely push back the Medicare eligibility age to 67 and the normal Social Security retirement age to 70. It also would block-grant Medicaid and switch Medicare to a premium support system, as the Ryan plan proposes. Additionally, it would add a modest means test and would place reasonable limits on agricultural subsidies and smaller entitlement programs.
In Medicare, the RSC proposal wouldn’t change anything for people 60 and older. But for people younger than 60 (that is, people born in 1952 or later), their eligibility age would move back two months for each year that passes after enactment of this provision. So for those turning 59 this year and currently eligible for Medicare at age 65, under this plan they would be eligible 12 months later.
Thus, those seniors would have six years to mentally and economically adjust to getting their benefits starting just 12 months later. Of course, Americans now live to almost 80 - and the overwhelming majority with vigor and health well into their 70s. Social Security disability coverage would continue to be available for the less fortunate.
But because of the scores of millions of people affected and the power of compound savings over time from even the smallest changes, the savings from this barely noticeable change in our lives will be substantial. According to the Congressional Budget Office, this one Social Security change by itself would close more than half the total Social Security long-term funding gap of $16.1 trillion. For further details, read the whole report of the Republican Study Committee “Honest Solutions: Fiscal Year 2012 Budget.”
Let’s follow the Ignatius standard and get the job done now so that the world bond market can trust the U.S. Treasury again and American businesses can be confident about employee costs and start hiring and investing again.
The Republican Study Committee budget gets that job done. If the Democrats or Republicans have other ways to get the same result, let’s see them. But no half-measures should be admissible in this great debate for our future.
Tony Blankley is the author of “American Grit: What It Will Take to Survive and Win in the 21st Century” (Regnery, 2009) and vice president of the Edelman public relations firm in Washington.