Budget debate: What should be the role of government?

Voters will have a fundamental choice between reducing spending and getting the programs they want.

Want to know what the Great Budget Debate of 2011 is really about? Ask Congressional Budget Office director Doug Elmendorf (who was a Tax Policy Center associate before joining CBO). In testimony to Congress’s fiscal super committee on Tuesday, Doug put the whole thing into a few simple sentences:

“I think really the fundamental question…is…where you want the country to go, what role do you …want the government to play in the economy and society?” [I]f you want a role that has benefit programs for older Americans like the ones we’ve had in the past, and that operate…the rest of the government like …in the past,then more tax revenue is needed than under current tax rates. On the other hand, if one wants those tax rates, then one has to make very significant changes in spending programs for older Americans” and the rest of government.

Doug is exactly right about these core choices. And that’s why it is so difficult for Congress and President Obama to reach any serious agreement on fiscal policy. At bottom, this argument is not about reducing the deficit by $1.2 trillion or $1.5 trillion to hit some artificial budget target. It is about reconciling fundamentally competing visions of the role of government.

Herb Stein, who was the top economic adviser to President Nixon, used to say that budgeting was simple: Congress’ job was to decide what it wanted to do and then figure out how to pay for it.

Unfortunately, in the four decades since Herb’s observation, Congress and a half-dozen presidents have done a fabulous job of finding stuff to do, but not such a hot job of paying for it (Bill Clinton, with the help of a roaring economy, was the exception).

Now, policymakers finally are struggling to do the work Stein described. And to do so, they must confront Doug’s choice: Do they do less than many voters expect, tax more, or both?

To add to the challenge, they are trying to do it at a time when the nation is deeply divided—and conflicted. Polls suggest most Americans support deficit reduction—but oppose the very spending cuts and tax hikes needed to achieve it. This disconnect is not helped by politicians who continue to promise pain-free deficit reduction.

At the most recent GOP presidential debate, for instance, former House Speaker Newt Gingrich insisted he could address
most fiscal problems by controlling, yes, waste, fraud, and abuse. “Anybody who knows anything about the federal government knows that there’s such an enormous volume of waste, that if you simply had a serious, all-out effort to modernize the federal government, you would have hundreds of billions of dollars of savings falling off,” Gingrich claimed.

Now, there is plenty of waste in government and we absolutely should curb it. But is it going to fix the deficit problem? Only in Newt’s dreams.

So increasingly, it looks as if we are going to have an election about the fundamental role of government—in creating jobs, helping those in distress, and preserving the nation’s health and safety. This may not be so true if Republicans nominate Mitt Romney. But it certainly will be if the GOP picks Texas Governor Rick Perry and Obama sticks with the powerful defense of government he delivered to Congress earlier this month. Not since Johnson and Goldwater would these competing visions be so clear. If nothing else, as Goldwater said, voters will have a choice, not an echo.