Samuelson: ‘Giveaway’ politics must give way

Robert Samuelson

WASHINGTON – Eugene Steuerle has given us a common-sense way to understand Washington’s budget stalemate. For half a century or more, politicians of both parties engaged in “giveaway” politics, he says. Democrats favored new spending programs; Republicans specialized in tax cuts. Each poached on the other’s political turf. But the need now is for “takeaway” politics, curbing spending and raising taxes. Politicians’ inability or unwillingness to embrace this demanding makeover underlies unending budget paralysis.

You don’t hear much about the paralysis these days. Both parties have quietly agreed to a truce. They’ve accepted the budgetary status quo rather than engage in the politically hazardous exercise of displeasing their partisans – Democrats by accepting cuts in Social Security and other “entitlement” programs; Republicans by supporting tax increases.

Outside of Washington, Steuerle is hardly a household name. But to those who follow budget and tax issues, he is a prominent and consequential figure.

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As a high-level career Treasury official in the mid-1980s, he did crucial staff work that led to the Tax Reform Act of 1986, widely regarded as the best tax legislation since World War II. It lowered top individual rates and ended some tax breaks. (Many of these achievements were undone in the 1990s when rates were raised and new breaks created.) After leaving government for the Urban Institute, a think tank, he was among the first to point out that the unchecked spending on the elderly – mainly through Social Security and Medicare – threatened other government priorities.

Steuerle’s new book, Dead Men Ruling, synthesizes three decades of analyzing federal policies and budgets. The central problem, he argues, is not the annual budget deficit or the resulting debt. These are merely the consequences of a larger affliction: “No matter how much the economy might grow in the future, all future revenues are already committed to permanent programs established by past legislators – to the exclusion of everything else.”

Hence, “dead men” – past political leaders – govern from the grave. They set the priorities. We have become prisoners of the past.

Budget figures make Steuerle’s point. In 1990, Social Security, Medicare and Medicaid (health insurance for the poor) totaled 6.7 percent of national income, or gross domestic product. By 2010, they were 10 percent of GDP. Using plausible assumptions, the Congressional Budget Office estimates this spending (including the Affordable Care Act) at 15.2 percent of GDP by 2038.

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To put these figures in perspective, annual federal spending since 1974 has averaged about 20.5 percent of GDP. An aging population, lengthening life expectancy and slower economic growth (which dampens tax revenues) have pre-empted future spending.

Steuerle judges this dangerous on many grounds. It will impede governments’ ability to meet unpredicted (but certain) national emergencies. High federal debt may crowd out private debt and investment, weakening the economy. Spending on children and public investments (research, defense, highways) will erode. Democracy will suffer because future generations won’t have the power “to make their own decisions” about priorities.

The need for “takeaway” politics flows from this analysis. There must be a moral and political basis for withdrawing, reducing and revising spending commitments and tax preferences that no longer serve the larger public interest. Public opinion must wean itself from the self-serving assumptions of giveaway politics.

These assumptions are easily stated. There’s no clear dividing line between legitimate and illegitimate functions of government – any “cause” that musters majority support qualifies as a proper governmental activity. This is OK, because rapid economic growth will finance new programs and tax preferences. And once in force, programs and tax breaks are virtually immortal, because they create their own constituencies. Ending any major program “breaks faith” with a public that is “entitled” to its continuation.

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It is these premises that must be re-examined for an age when government has overcommitted itself. Naturally, this starts with questioning the open-ended retirement subsidies for the elderly, because they dominate the budget. But the review must extend to most government activities, weeding out the unessential or ineffective. Any rigorous review of government’s scope would almost certainly leave taxes higher than Republicans would like and spending lower than Democrats would like.

Unfortunately, Steuerle doesn’t show us how to get from here to there. Where to draw the line for government and why? Steuerle doesn’t engage this unpopular process in any detail. Unless public opinion shifts, the budget stalemate will persist. But being brutally honest in defining a new social contract, people like Steuerle might make it easier for practical politicians to do what, up until now, has been impractical.

Robert Samuelson’s column is distributed by The Washington Post Writers Group.