Let the screaming begin.
Finally, we have a semi-serious plan to rein in government spending, reduce the debt, and prevent America from going broke. President Obama's "deficit commission" has issued a draft report with dozens of concrete proposals for cutting spending and raising taxes, but it also contains one unstated conclusion: No politician hoping to get reelected will ever support all the measures it will take to make America solvent again.
Consider a few of the commission's proposals:
Gradually increase the retirement age to 69, prolonging the age at which Americans can receive Social Security payments.
Increase the amount of income subject to the Social Security tax.
Impose more "cost-sharing" on Medicare recipients.
Gradually raise the federal tax on gasoline by 15 cents beginning in 2013.
Limit the mortgage-interest deduction to homes costing less than $500,000.
Cut annual defense spending by $100 billion.
There are other unspecified cuts that sound good in theory, but would end up being painful and unpopular as well if they were ever spelled out and enacted. In addition to $100 billion in defense cuts, for instance, the commission wants to cut another $100 billion per year in "discretionary" spending, which includes stuff like roads, schools, disease research, and other things voters generally like. The panel also wants to "identify" another $200 billion per year in cost savings on federal health spending, which can only come from Medicare or Medicaid.
Economically, it's a sound start. But for politicians, it's a blueprint for how to alarm voters and lose the next election.
Sooner or later we're going to have to take steps like those the deficit commission, headed by Erskine Bowles and Alan Simpson, has recommended. The question is whether Washington politicians always looking to the next election will stand up for tough choices now—or pander, dodge, and stall until a full-blown crisis makes draconian measures politically defensible. It doesn't take Las Vegas oddsmakers to predict the most likely outcome.
If there's any hope at all of reforming government, it will have to happen under a second-term president who can afford to let his popularity plummet. And the first person to fit that description would be President Obama, if he got reelected in 2012. Yes, it sounds counterintutive. Americans obviously don't think Obama is the right man to rein in government. That's why Republicans handed Obama and his Democratic Party a "shellacking," as Obama himself put it, in the midterm elections, taking control of the House or Representatives and gaining significant power in the Senate. And Obama's record so far is certainly unpersuasive. Through healthcare and financial reform, for instance, he has created several new government agencies, while eliminating only one (the Office of Thrift Supervision).
But Obama, ironically, may be the best and only chance for cutting government any time soon. If Republicans take the White House in 2012, their primary focus will be on retaining power for the next eight years (or 80). In the current political climate, that simply won't happen if a new president sweeps into office in 2012 and promptly announces that taxes are going up and Social Security, Medicare, and homeowner benefits are going down. Republicans insist that raising taxes isn't the way to solve this problem, but if they stick to that, the only answer is to cut spending even more.
A tiny microcosm of this battle is starting to play out even before newly elected Republicans take office in January. Republican Sen. Jim DeMint of South Carolina and a few others insist that Congress should ban earmarks, the pet spending projects that lawmakers slip into practically every bill Congress passes. During the fall campaigns, Republicans and even some Democrats supported the idea, which has obvious populist appeal. But now that it's time to actually cut the pork, Mitch McConnell, the Senate Republican leader and a bunch of others are backpedaling, saying that earmarks are important because they represent Congress's constitutional prerogative to set spending priorities, blah blah blah. While earmarks symbolize Congress's flaccid discipline, it's worth pointing out that they add up to only about $16 billion a year—a tiny fraction of the cuts the Bowles-Simpson panel has called for. If politicians can't manage to give those up, far bigger cuts seem hopeless.
Obama would face plenty of his own risks if he did in fact do an about-face and become Mr. Austerity in a second term. Imposing unpopular cuts could obviously set the Democrats up for further drubbings, which could put the White House in Republican hands in 2016. And if deep cuts in government came at the wrong time, or occurred in the wrong way, they could torpedo an economy that's likely to be hobbled for some time, making Obama the Herbert Hoover of the 21st century.
But a shrinking government under Obama may not be as improbable as it sounds. It was Obama, after all, who set up the deficit commission on his own authority earlier this year, after the Senate stuck its fingers in its ears and voted down a measure to set up its own fiscal commission. And Obama has insisted that he'd rather do the right thing while in office, even if it makes him unpopular, than pander to voters and peddle the usual Washington fantasies. If voters feel otherwise in 2012 and reject Obama, then we'll wait until at least 2016 for a president to get serious about cutting government. Unless the coming crisis erupts before then.