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Archive for June, 2013

The Left’s Four Fiscal Fantasies

June 28th, 2013

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This piece was originally published in the Washington Post.

There is a rising chorus on the left, most recently articulated in an op-ed Monday by Neera Tanden and Michael Linden [“Deficits are not destiny”] of the Center for American Progress, that our fiscal conversation should be declared over and plans for meaningful entitlement reforms mothballed. These voices argue that we can have substantial new spending on public investments, a secure safety net, no middle-class tax increase — all without addressing entitlement spending.

Lo, if it were so. But the left’s reasoning is predicated on four fiscal fantasies that Democrats must see through if they hope to expand the economy, help the middle class and keep the safety net solvent.

Fantasy No. 1 is that taxing the rich solves our problems. Let’s say the top income tax rate were raised a whopping 10 points, to 49.6 percent — a level higher than anything under serious consideration. Tack on the “Buffett rule,” with its 30 percent minimum tax on millionaires to squash loopholes. And let’s take a whack at wealthy inheritances, cutting the estate tax exemption by about one-third and setting the rate on large estates at 45 percent.

If we leave entitlements be, our annual budget deficit in 2030 would still be $1.3 trillion in today’s dollars, not much different from the $1.6 trillion deficit we’d have if income tax rates for the wealthy are kept the same. Sure, raising some additional taxes on the wealthy is necessary, but it is not nearly sufficient.

Fantasy No. 2 is that “we can have it all” — a bigger safety net and more investments that spur growth and opportunity. Events of the past 50 years say the opposite.

In the mid-1960s, the federal government spent $3 on public investments for every $1 on the major entitlement programs. By the early 1970s, the ratio was one to one. Last year, it flipped. The federal government spent $3 on Social Security, Medicare and Medicaid for every $1 on federal investments, according to our analysis of data from the Office of Management and Budget. By 2022, the ratio will be one to five. In other words, entitlement programs are drowning out public investments just as international competition and technology demand that we need these investments the most.

That is a 50-year trend, but what is most mind-boggling is that some on the left still cling to a belief — bordering on faith — that if a spending program is worthy, voters will support it without trade-offs. Yet the evidence is clear that as Democrats have sought to increase spending beyond a certain point, voters have taken them to the woodshed. Recall 2010: The health-care bill (which our organization vigorously endorsed) exceeded the limits of what voters were willing to spend after the 2009 stimulus, auto rescue and bank bailout. That November, Democrats lost the House, Republicans controlled 29governorships and the tea party became dominant.

Fantasy No. 3 is that a delay on entitlement fixes is benign for the middle class. As evidence, some liberals point to this year’s Medicare trustee report, in which the program’s fiscal outlook — mercifully — improved. In truth, it improved from horrid to awful. We can’t make even that boast about Social Security, where the outlook is plain wretched. Over the past 10 years, the Social Security insolvency date had leapt forward from 2042 to 2033. The hope was that an improving economy would push the date farther out. It did not, and every indicator of Social Security health worsened between the 2012 and 2013 trustee reports.

If there is one message from the trustee reports, it is that every year we wait, the inevitable fixes to Social Security and Medicare get harder. Here is one example: Several years ago, proponents of an all-tax solution to Social Security solvency called for eliminating the cap on payroll taxes to solve the entire problem. Now they say it solves most of the problem. That’s because we waited too long. Eliminating the FICA cap — a step that we do not support — solves 79 percent of the problem. Now, supporters of a tax-only solution also call for adding a point to the payroll tax rate for all workers. That one point means a tax increase of $650 a year for a typical working family. Over the course of their working lives, it will come out to more than $20,000. Waiting is anything but benign.

Fantasy No. 4 is that the politics to fix entitlements will get better. In fact, the politics will get worse every election cycle. In 2012, one out of six voters was a senior citizen. By 2024, one in four will be, based on the Census Bureau’s Statistical Abstract. How will we possibly fix safety-net programs for the elderly then? The answer: on the backs of the working-age middle class.

The country and Democrats face real fiscal choices. Avoiding them in favor of fantasies is not the answer.

Where’s the Body?

June 13th, 2013

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What’s missing is a victim.

That’s why all the scandals roiling Washington are not having much impact on public opinion. No one seems to have been damaged by the revelations. If the government is abusing its power with these vast surveillance programs, we need to see an abuse—an American who was harassed or persecuted or whose rights were violated.

Otherwise, the scandals are all about theoretical issues and potential abuses of power.  Those are serious concerns for civil libertarians on the left like the American Civil Liberties Union (ACLU) and for libertarians on the right like Sen. Rand Paul (R-Ky.), both of whom are taking the federal government to court.

To get traction with the public, however, we need a face. We need the story of Suzy Creamcheese of South Succotash, New York, who once said in a telephone conversation with a friend that she is so angry with her brother-in-law, she could just kill him. And lo and behold, the feds come after her for making a dangerous threat. Then we’d see a wave of public outrage. It was a private conversation! What right did the feds have to listen in on Suzy without a court order authorizing a wiretap? Read the rest of this entry »

This Is No Way to Run a Jihad

June 12th, 2013

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CEOs don’t like it when they discover massive changes within their corporations from the media – but that’s what happened this spring to Ayman al-Zawahiri. Al-Qaida’s chief awoke one day to discover al-Qaida in Iraq, or AQI, had announced it was merging with Jabhat al-Nusra, currently waging jihad in Syria against Bashar al-Assad. Zawahiri then dashed off a three-page letter to both groups annulling the merger.

But CEO Zawahiri will soon discover that his ability to influence his franchises through his words – not backed up with money, men, and arms – has little impact on the twists and turns of the Iraq-Syria conflict. Once again, the diminished share price of the AQ ticker symbol will be evident to the brokers of terrorism in the exchange of global jihad.

A little background: Jabhat al-Nusra came into being as an AQI offshoot and quickly became one of the most effective (and brutal) groups fighting the Syrian government. In December 2012, the State Department announced that al-Nusra and AQI were one and the same; it was unsurprising then when AQI head Abu Bakr al-Baghdadi declared a new AQI-Jabhat al-Nursa group, the “Islamic State of Iraq and the Levant,” or ISIL, in April 2013. Read the rest of this entry »

Trade: Boosting Exports to China

June 11th, 2013

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Twenty years ago, American businesses flocked to China with vague but ambitious plans to sell its billion consumers everything from toasters to telephones. But in a market that had no meaningful middle class, they found few takers. In the years since, China has successfully tapped into foreign investment and know-how to build a powerful, export-oriented economy—and a rapidly expanding middle class—largely by selling to America’s middle class. Its success has stoked American concerns about trade deficits and the loss of middle-class jobs to low-cost foreign competition.

But China’s ongoing transformation points to a potentially different future: one in which America expands its exports, achieves fairer trade, creates good jobs, and strengthens the middle class—by increasingly selling to China’s burgeoning middle class.

Read the rest of this entry »

Can Christie tackle the partisan divide?

June 10th, 2013

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How often these days do we see a political figure liked by both Republicans and Democrats? Not so often that we should fail to notice.

But there was the evidence last week in two different polls. New Jersey Governor Chris Christie drew a 58 percent favorable rating from his fellow Republicans around the country and 52 percent from Democrats in a recent Gallup Poll. Forty percent of Republicans in the NBC News-Wall Street Journal poll, and 43 percent of Democrats, said they like Christie. (The NBC-Journal numbers are a bit lower because the poll offered a “neutral” option.)

Christie seems headed for a big re-election victory in New Jersey this November. Polls show him running 30 points ahead of his Democratic opponent. This is in a state that has voted Democratic in every presidential election since 1992.

The country has now had four presidents in a row who promised to heal the bitter division between red and blue America. They all failed. Under each successive president – George H.W. Bush, Bill Clinton, George W. Bush and Barack Obama – the partisan divide has gotten worse.

Obama has proved that nice doesn’t work. He tried to make deals with Republican leaders. He tried a charm offensive with rank-and-file Republican legislators. All he got in return was insults and investigations. Now it’s “No more Mr. Nice Guy.” With his latest round of appointments to his national security team as well as the courts, Obama has given up trying to satisfy Republicans. His new message: “In your face.”

But Obama’s got a long way to go before he can match Christie for “in your face” politics. Christie is the un-Obama.  He doesn’t look like Obama, and he certainly doesn’t act like Obama. Christie doesn’t trade on being nice. He busts heads.

He also speaks Jersey. When he was challenged by property owners who complained that he intended to build attractions rather than storm protection on the Jersey shore, Christie shouted back, “That’s bullsh*t!” (After advising children to cover their ears.)

Read the rest of this entry »

How to end the war on terrorism properly

June 10th, 2013

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Note: This piece was co-written with Christopher Preble, Vice President for Defense and Foreign Policy Studies at the Cato Institute.

In his speech on counterterrorism last month, President Barack Obama said something both profound and overdue – the war underway since 2001 should end, not just factually but also legally. Outlining his views, the president said he wanted to “refine, and ultimately repeal,” the Authorization for Use of Military Force (AUMF), the main legislative vehicle governing U.S. counterterrorism operations around the world. He also pledged not to sign laws designed to expand this mandate further.

But to make that goal a concrete reality, the president should have called for legislation repealing the administration’s authority for war – sunsetting the AUMF, which provides the legal authorization for our troops in Afghanistan, once combat operations there conclude at the end of 2014. Future counterterrorism operations can rely on the plentiful authorities the executive branch already has, including some that have been added since 9/11. And if this president – or any other in the future – needs greater war powers to deal with a threat, they can return to Congress and ask for specific, limited authorities tailored to address the future challenge.

The fact is that while there are other ways the AUMF could be usefully altered, a clean repeal has significant advantages. Read the rest of this entry »