What if You Had a Debt Commission and No One Listened to It?

It was perhaps the last good governing idea the GOP had. Throughout 2009 the Republicans in the Senate stomped their feet and demanded a statutory debt and fiscal responsibility commission of esteemed elder statesmen who would present their recommendations and Congress would vote on them without amendment. Of course, when Obama agreed to it, seven of the same Republican senators that demanded it, filibustered it.

If you wondered if there was a precise moment that I realized that the United States was doomed, that was it. It became clear at that moment that no one was truly serious about the issue and that the Americans would wait for the bond market to rectify the problem for them, like they did in Greece. As you may have noticed, Greeks didn't react well to it and neither will Americans. The only difference is that Greeks don't have many guns and Americans do.

I'll grant the Tea Party one thing: They talk a good game about debt. The only problem is that they don't know what they're talking about. While they have mastered the process of dethroning otherwise reliable Republicans, like Lisa Murkowski and Bob Bennett, they don't know the first friggin' thing about economics or history.

They believe that the national debt - which is more of an existential threat than the Soviet Union was, let alone terrorism - is simply a spending problem, and they're not even half right. The fact is that American taxes have been cut by nearly two-thirds since the Kennedy administration, while entitlements and foreign military commitments have expanded well beyond the government's ability to finance them. Cutting $50 billion in fucking earmarks or a few hundred million from National Public Radio isn't going to even begin to address the fundamental problems. Even conservative economists will tell you that the Tea Party's idea are retarded.

Anyhow, after the Senate Republicans exposed themselves as craven assholes, Obama created the debt commission by executive order and it began its work. This is problematic in that when its recommendations are submitted, Congress can amend it out of existence, which could actually make the problems worse.

The panel's co-chairs, Democrat Erskine Bowles and Republican Alan Simpson yesterday leaked their draft recommendations. And I have to say, they're brutal enough to actually be effective.

The plan calls for deep cuts in domestic and military spending, a gradual 15-cents-a-gallon increase in the federal gasoline tax, limiting or eliminating popular tax breaks in return for lower rates, and benefit cuts and an increased retirement age for Social Security.

Those changes and others, none of which would take effect before 2012 to avoid undermining the tepid economic recovery, would erase nearly $4 trillion from projected deficits through 2020, the proposal says, and stabilize the accumulated debt.

(...)

The plan has many elements with the potential to draw intense political fire. It lays out options for overhauling the tax code that include limiting or eliminating the mortgage interest deduction, the child tax credit and the earned income tax credit. It envisions cutting Pentagon weapons programs and paring back almost all domestic programs.

The plan would reduce cost-of-living increases for all federal programs, including Social Security. It would reduce projected Social Security benefits to most retirees in later decades, though low-income people would get higher benefits. The retirement age for full benefits would be slowly raised to 69 from 67 by 2075, with a “hardship exemption” for people who physically cannot work past 62. And higher levels of income would be subject to payroll taxes.

A good way of judging the seriousness of a plan is who it upsets, and the Bowles-Simpson draft has all the right people (meaning everybody) bouncing off of the fucking walls. Everybody from Nancy Pelosi to Tea Party blogger-in-chief, Erik Erikson are furious, which means that the plan could actually work if implemented.

Social Security, in particular, needs to be reformed and revenue has to be raised. The best way of doing that is to reform the tax code. You actually can have lower overall rates if you eliminate the childish deductions that the middle class currently enjoys, such as mortgage deductability, which no other industrial country has. If it were up to me, charitable and political contributions would be gone, too. I've never been able to intellectually justify the government subsidizing your charitable and political decisions and the situation is now too dire to continue the stupid practice.

Most importantly, American foreign policy needs to be fundamentally rethought. A country only needs a military as big as its foreign policy dictates. And when you're spending more on your military on the next 27 countries (26 of whom are your allies), something is desperately wrong. Since 1989, the United States military has been constantly deployed in combat operations and the budget can't take it anymore.

You might have noticed that since the fall of the Berlin Wall, the world's map has gradually shifted back to what it was before World War I. It might be time for geopolitics to do the same, and for the great powers to resume the practice of "balance of powers" and "spheres of influence" that were established at the Congress of Vienna. American rhetoric about expanding freedom is fantastic but impracticable when the United States is financially ruined beyond repair.

That's what no one seems to get - America's problems are unique because it is in a unique position, one far more intractable than Greece's or Ireland's. First, no one can bail out an economy as large as America's. Second, no one would bail it out if it insists on maintaining large, unfunded entitlements and an assertive foreign policy that requires expensive wars of choice. Either the United States can reform itself or the United States will become Zimbabwe faster than anyone thinks.

I actually think that both political parties understand that. My longtime readers have probably noticed that I rarely actually blame politicians for anything other than coddling ignorant and selfish voters. Eventually the public has to get it. There's been a failure of economic leadership from Washington because that's exactly what the voters have demanded. No politician has said that you don't "pay" for your Social Security when you collect everything you've paid into the system in the first two years after retirement but you stubbornly insist on living for ten. Politicians have steadfastly refused to tell voters that elderly people are usually sick and take forever to die, so Medicare premiums need to go up significantly.

The public doesn't want to hear that, so nobody tells them. Instead, both parties masquerade as the "party of Medicare" or that they "hold Social Security as a sacred trust." Very few Americans are willing to challenge the fundamental premises of their own foreign policy, so much happier are they to hold parades for Jessica Lynch. No political leader s willing to say those things to public because the public would destroy them.

The rich and the poor aren't the problem. The rich largely take care of themselves and the poor generally die too young to cost all that much. The root of the problem is the middle class and the elderly, for whom those entitlements and tax deductions were designed. And they categorically refuse to accept responsibility for anything. It doesn't help that their government hasn't asked them to sacrifice a goddamn thing since World War II, but if they're financially literate enough to manage their households, they should be expected to know how to manage their country. And that applies to foreign policy, as well. The truism is that government should be run like a household, but I can't think of a single household that uses hundreds of thousands of dollars worth of weaponry to forcibly install a new lifeguard in a private swimming pool twelve blocks away.

Erskine Bowles and Alan Simpson did something truly heroic yesterday. They actually told the truth about what this going to take. And if the last 24 hours demonstrates anything, it's that the public and the parties aren't willing to listen. They continue to insist that everyone can keep getting their goodies while refusing to pay for them. Somebody else can sacrifice. Or not.

It's tragic to see this happen to a great country and a magnificent people, but in the end, they're the architects of their own destruction.


Update: I highly recommend reading this (PDF) presentation, which should scare the tits off of you.

Key passage;

The debt burden accumulated over the next ten years will sink us. And a decision will get made... one of two ways. One way is to do it now, proactively, and thoughtfully. The second way is to wait until the Bond Market forces us to do it. We can ask Greece what that's like.

Thanks to Powerline.

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