Stop Me Before I Spend Again

The debates over public employee pension benefits in Wisconsin and high-speed rail are, at heart, the same question: what to do about growing government debt? There seem to be four basic views.

On the Democratic side are the Krugmanites, who think we need to stop worrying about deficits and spend, Spend, SPEND our way out of the recession. While the 2009 stimulus bill preserved some government jobs, it did little to stimulate the rest of the economy, and Megan McArdle reasonably asks if, possibly, Keynesian economics, even if valid in theory, is just not practical because no country can afford the prescription.

(It probably isn’t fair to Keynes to call Krugman’s view “Keynesianism.” Keynes actually had a very pragmatic and nimble mind and his ideas were far from the one-size-fits-all prescription–more government spending–advocated by Krugman.)

Fortunately, few elected Democrats still espouse the Krugman line. Instead, since the November election, most seem to be saying, “Yes, we need to reduce deficits–but not yet. Let’s at least wait until the recession is over.”

This might be the view held by Treasury Secretary Tim Geithner, who admitted to a Senate committee that the president’s budget is not sustainable. In the above video, his statement is castigated by Senator Jeff Sessions (R-AL). While it would be nice to hear Geithner’s response, many Tea Party conservatives seem ready to impeach Geithner for failing to present Congress with a sustainable budget proposal.
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Since conservatives are such strict constructionists, they should reread the Constitution, which gives the president very limited powers. Only four are specifically mentioned: commander in chief of the military, the power to make treaties (with the advise and consent of the Senate), the power to “fill vacancies,” and the power to veto legislation.

Beyond this, the president is merely the nation’s “executive,” meaning the person who executes the laws written by Congress. As my fellow Catoite, Dan Healy, notes in his book, The Cult of the Presidency, for much of our history that president did not propose laws, but merely carried them out.

In other words, writing a sustainable budget is the job of Congress, not the president or the treasury secretary. Yet Republicans themselves are split over how to do this.

On one side are Republicans like Florida’s John Mica, who talks the talk about cutting spending, but won’t walk the walk. Specifically, Mica says he oppose new high-speed rail funding but objects to Florida Governor Rick Scott’s rejection of the Tampa-to-Orlando rail project.

On the other side are the true fiscal hawks who not only want to cut discretionary budgets but are willing to look at entitlements. They, unlike most of their colleagues, are willing to accept the pain of budget cuts today rather than defer them to the future as so many past Congresses have done.

They should take a look at the 19 percent solution proposed by Reason magazine‘s Nick Gillespie and Mercatus Institute’s Veronique de Rugy. Using historic budgetary data going back to 1950, they demonstrate that, no matter what the marginal tax rate, the federal government has never been able to collect more than about 19 percent of gross domestic product in taxes. Raising taxes is therefore not the solution to deficits; the only reasonable solution is to reduce spending to or below 19 percent of GDP.