In his State of the Union address, the President summoned us to do “big things” again through government. He outlined a prodigious agenda of investments in education, research and infrastructure. This can help improve national economic growth, but only if the shadow of deficits is definitively curbed or vanquished.
It can be easily understood why a progressive President might shy away from making deficit reduction topic A. Some have argued that the issue plays into the hands of the tea party and the Republican House. Others have suggested that Presidents should not show their hand too early in what amounts to a protracted negotiation with the other side. After all, his largest victories on health care, stimulus and financial market reforms occurred by working quietly bargaining with the Congress outside the glare of media and restive publics alike.
Ironically, if you believe in big things through government, deficit reduction should be your top priority. The decades of unsustainable debt in our future will prevent government from being the creative engine for growth that the President feels it should be. Today’s CBO report should chasten us all – the 10 year interest on the debt of $5.4 trillion puts the President’s $400 billion domestic spending freeze, and even the Republican Study Group’s $2.5 trillion in depressing perspective.
Moreover, an insider legislative strategy that worked well in his first two years when his own party controlled the Congress won’t work when facing a Republican House.
The State of the Union provided him with a golden opportunity to contest the tea party for the deficit high ground by showing the nation that progressives have a viable deficit reduction agenda that is both fiscally sound and more consistent with a positive role for government in an aging society.
A public investment surge is but one small piece of a larger progressive strategy for sustainable fiscal and economic policy. Most importantly, progressives can make the case for higher revenues which all serious fiscal observers acknowledge will be necessary given the size of the fiscal deficits we face. Democrats have been intimidated for the better part of 30 years by the reigning anti-tax mood of the elite, as reflected in the Obama Administration continuation of the Bush tax cuts for the middle class in perpetuity.
Nobody likes to raise taxes but the United States is in a far better position to do so than our trading partners. Our position near the bottom of advanced nations in tax burden gives us the capacity to increase revenues without getting out of step with our competitors. Higher taxes are never welcome, but simply put, they are the “least-worst” way of financing government when compared to debt and printing money.
A progressive agenda on taxation includes going after tax expenditures such as the mortgage interest deduction and health care writeoffs. It might even include a Value Added Tax (VAT.) that could help us both reduce deficits and spark higher levels of national savings without decimating important public commitments.
From the President’s political vantage point, the “bottom line” is that the day of reckoning on fiscal policy is fast approaching. If he fails to step up with a compelling strategy, others are waiting in the wings. The tea party for one – and the bond market which will force our hand if our political leaders don’t take the initiatives.
Paul L. Posner is the Director of the Public Administration Program at George Mason University. He is the Chair of the Federal Systems Panel of the National Academy of Public Administration and Immediate Past President of the American Society for Public Administration. He has authored numerous articles on budgeting and federalism and his book, the Politics of Unfunded Mandates received the award for best book on federalism from the American Political Science Association. Before his current position, he was with the GAO, serving as managing director for federal budgeting and intergovernmental management. He has also served as a consultant to the Pew-Peterson Commission on Budget Reform.
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