My basic view is very much close to Justin Vaughn’s, though I would conceive of the paths or views in different ways. I would love to have my thoughts corrected or engaged, so please have at it.

Let me begin with a complaint about calling this the “fiscal cliff” debate. It is a debate about fiscal policy—about budgeting, that is. But there is no cliff on the other side of the debate. The real cliff will, in my judgment, be reached when America faces its long-term sovereign debt crisis. At some point and in some “unpredictable” way, the borrowing necessary to keep our governments running will reach a point of no return for the country. I do not know what that point is, but I think that is what a cliff is. No matter how this current mini-crisis is solved, this larger and real cliff is what we should have our eyes on.

TBR Fiscal Cliff Group Blog

  1. Fiscal Follies by Todd Shallat
  2. Fiscal Cliff is Fork in the Road by Justin Vaughn
  3. So Let’s Kick Some Cans by Scott Yenor

I am also much less ambitious than either of my colleagues (and probably a bit more dour in a way). Life is kicking the problems down the road; as I say to my kids, “life is a series of small problems in the context of one big problem: you are going to die.” Governing is the same thing; the best statesmen eliminate problems, but new ones will arise. A statesman today that could kick the can far down the road would be doing a great service to the nation. So let’s kick some cans.

I also do not think there will be moment when America decides to take one fork or another fork. We are, as a people, much more likely to come to the fork in the road and, Yogi Berra-like, take it. Our question is “How will we balance America’s competing commitments?” And for all that I think it is necessary to explore a bit more what our commitments are and why we will as a people take both.

Chart via National Affairs (click for larger version)

First, the Democratic Party in general and the Obama Administration in particular stand for more than the regulatory state and a social safety net. A “safety-net welfare state” would be designed for the poor, the people who have fallen due to the vicissitudes of the market or due to singular misfortune or catastrophic circumstances. What we have is an entitlement state, where the largest and increasing share of government benefits are dispensed to the middle class, or even regardless of income. Warren Buffett gets a much higher level of benefit from Social Security than any impoverished individual, for instance. Everyone gets Medicare and Social Security—two of the larger drivers of our real fiscal cliff—not just the poor.

This tendency toward an entitlement welfare state has done nothing but expand in the past four years. Obamacare’s subsidies for participation in the health care exchanges—exchanges that states may or may not set up—go to everyone up to 400 percent of poverty line. This means that people well above the median income are now considered eligible for medical aid to impoverished individuals. Much the same is true of other support programs. More people above the poverty line now receive food stamps than the number below the poverty line.

Much the same thing can be said of the Children’s Health Insurance Program (CHIP) and Non-Disabled Medicaid enrollees, where the number of enrollees above the poverty line has increased dramatically as a result of changes made by the Obama Administration in these programs. All of this is just to establish what I take to be the fact: the Democratic Party is defending something beyond a “safety net”—it aspires to the creation of a welfare state with entitlements for all. I believe that the Democratic Party aspires to make permanent the changes wrought by the Obama Administration, and this equals an increase in the share of Gross Domestic Product consumed by the national government to over 25 percent (from its historical average of 20 percent).

Non-Disabled Medicaid and CHIP Participants by Poverty StatusChart via National Journal (click for larger version)

Second, the other wing of the debate is “austere” only in relative terms, not in absolute terms. Republicans and conservatives are divided on what their ultimate goals are, and this has always been part of the problem with conservatives (and why I find conservatives much more interesting). Some want a reformed or conservative welfare state. Others want to get back to the basics and dismantle the pillars of the modern welfare state. Both however are united in the desire to restore limits on government, to seek a limiting principle on the entitlement state reigning in the United States. The limiting principle that conservatives are defending in current debates is the idea that the welfare state should establish a limiting principle—it should help the poor or it should establish a welfare state that is a safety net. Such a welfare state would consume something like the historical average of GDP of about 20 percent. That is what I take to be the other path that I think Justin is talking about. Perhaps it is austerity. Perhaps it is a somewhat limited government. It is the “Ryan plan.”

The welfare state must be funded. The larger the welfare state, the wider the eligibility, the more it must raise taxes to pay for its commitments. If the welfare state makes life better, then the sacrifices necessary to pay for its commitments should be seen as a just and necessary way of improving our society. It cannot be paid for by making “the rich” pay their “fair share.” There is not enough money in the country among “the rich” to pay for our current commitments. We could cover the deficit by imposing a 100% tax rate on all income over $100,000 (assuming such people would continue to earn as much as they did when their tax rate yielded actual income and assuming that the national government did not take on more obligations).

There is a great discrepancy between the welfare state that Democrats want to maintain and build and the tax system that is required to pay for it. The Democratic Party’s reaction to all of this has been to seek to avoid it—promising never to raise taxes on middle class people. That is fantastic. The problem for Democrats is that they need tax revenues and votes; promising increases in the first makes it hard to get the second and telling the truth to the second puts one in a minority where one cannot be in a position to do the first.

The Republican’s problem is less severe, though more complicated. They want to limit government in a country that is not ready for that or that does not want to. Republicans have tried to “starve the beast,” hoping that the amazing public debt of the United States would force responsible statesmen to acknowledge problems and reform the system. That strategy has not been a success and it has contributed, after a fashion, to the genuine fiscal cliff. It has put Republicans in a position where their position will be vindicated only if something really bad happens to the country. Republicans are opposed to “serving the check,” that is, to raising the taxes necessary to avoid the genuine fiscal cliff because they think, plausibly enough, the money will be used to avoid making the necessary changes in the composition and commitments of America’s welfare state. A Republican would have to be a fool to accept the idea of “tax hikes now and spending cuts later.”

The Republicans put themselves in this box and the result was the current faux fiscal cliff. It would not be a disaster if we went over this cliff. It would “serve the check” a bit and slow the rate of growth in government a bit (though it would not touch the true drivers of our sovereign debt). Both parties must keep their eyes on the real cliff and use this current small crisis as a way of increasing the distance from our genuine fiscal cliff.

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The views and opinions expressed here are those of the writer and do not necessarily reflect those of Boise State University, the Center for Idaho History and Politics, or the School of Public Service.

  • Well said, Doctor Yenor. I also do not see this crisis as the horrible “cliff” that many people, particularly the media, like us to believe. It is more of a gentle slope; the real cliff looms on the horizon.

  • You are completely off the mark. Economic stimulus works, and that’s what Democrats are fighting for- not a permanent middle-class dependency on government aid. The Republicans are content to debate fiscal morality while our nation falls into economic ruin.