Fiscal prudence was a winning strategy for the Republicans last week. In midterm races around the country, Republicans slammed an unpopular Democratic majority that ran up a trillion-dollar budget deficit in the service of staving off economic crisis.
But can these fledgling deficit hawks really hunt?
There are two sides to any ledger - the cost side and the revenue side. The Republicans vow to cut wasteful spending but also vow to extend the Bush-era tax cuts in perpetuity. This is similar to the fuzzy math that got them into trouble during the administration of President George W. Bush when they enacted tax cuts and then put two wars and a brand new Medicare entitlement on the national credit card. Did these guys flunk math, or do they think that you did?
Because of the severity of the recession, we favor a short-term extension of the tax cuts for all taxpayers - probably for a year. That includes taxes on dividends and capital gains. The estate tax, which expired this year, should be reinstated but with a higher exclusion and a lower rate than before.
Congress also could raise taxes to the moderate levels of the Clinton administration for anyone making more than $1 million a year while leaving the rest of the Bush tax cuts in place.
In the meantime, the nation needs to have an adult conversation about taxation and spending.
Republicans often say they want to cut "waste, fraud and abuse." Fine. Let's cut all earmarks - that's $8 billion a year. How about trimming back farm subsidies? That could save another $8 billion to $10 billion annually. Let's cut road projects and loopholes for corporations. Another few billion.
Those ideas have merit. But they amount to chicken feed. There is simply no way to tackle the country's long-term fiscal problems without making changes to entitlements - and raising taxes.
The problems with Medicare, Medicaid and Social Security are well understood. Without changes, these popular programs will trigger a fiscal crisis. The Government Accountability Office projected earlier this year that Social Security would begin running cash deficits and redeeming trust fund assets to pay benefits in 2016.
If the Bush tax cuts are extended through 2020 and revenue held constant at the 40-year average, 93 cents of every dollar of federal revenue will be spent on major entitlement programs and net interest costs, the GAO said in its January report.
Social Security might be put on solid ground by increasing the amount of income taxed for the program or raising the age for drawing a check. Bringing Medicare to heel will be harder. The health care reform law passed earlier this year may help, if it works as advertised. But the law doesn't do enough to control costs.
Fiscal discipline requires honesty with citizens about the choices confronting the country. Despite what we've been told, we cannot have it all. Perhaps both parties should try something new: Telling the truth - and finding common ground. Come to think of it, these principles could work in states as well as in Washington.
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