Once merely a worthy subject of concern, America’s fiscal outlook has rapidly become the object of widespread alarm. “Aside from weapons of mass destruction and terrorism, America’s fiscal situation is the most dangerous challenge facing the country,” says Mr Gregg. “Unchecked, it will reduce growth, weaken the dollar and ultimately undermine America’s global leadership role.” The administration cannot be blamed for what is this year an almost entirely inherited deficit. Mr Obama’s new spending accounts for only about one-tenth of it. The effects of the recession, the costs of the bank bail-out and the structural legacy of the three large tax cuts and two wars bequeathed by George W. Bush account for the remainder. Nor do critics, including Mr Gregg, blame the new president for pushing through a $787bn two-year fiscal stimulus within a month of moving into the White House. “We needed to dig the economy out of a hole,” says Mr Gregg. “I understand that.”
Well, I’m glad that at least one Republican recognizes that this President inherited both a fiscal mess and a deep recession from the economic mismanagement of the previous Administration.
But politics is quick to change. The otherwise deeply unpopular Republican party is starting to sense an opportunity. A rapidly growing proportion of the US public is registering anxiety at the sea of red ink pouring out of Washington. In the past week, two prominent polls showed that twice as many Americans were concerned about growing budget deficits as reforming healthcare – Mr Obama’s overriding domestic priority.
Republicans for the past 30 years have only pretended to care about fiscal responsibility as they simultaneously push larger defense department budgets and more tax cuts. OK, healthcare reform may indeed increase government spending but why not pay for it with tax increases:
Mr Obama has also pledged to ensure that the $100bn-$150bn a year healthcare reform will be “budget-neutral” – requiring no net extra spending. Some liberals see this as a straitjacket that could pare back the benefits he promised to extend to the 47m Americans without insurance and the tens of millions who are seen as underinsured. Conservatives, meanwhile, flatly refuse to believe it. “Obama wants healthcare spending to be budget-neutral and I want to be six foot four and have a full head of hair,” says Mr Holtz-Eakin.
Look – I’m never going to be tall either but Douglas Holtz-Eakin knows that we could indeed raise taxes if the political hacks that currently lead the GOP drop their no new tax pledge. But the ultimate nonsense comes here:
But even if Mr Obama does ensure that expansion of healthcare is fully paid for, existing spending on healthcare and the Social Security retirement scheme remains on a path that will eventually bankrupt the federal government.
Oh please – the Social Security Trust Fund has a sizeable reserve that will continue to grow for the next decade. Luce sort of notes this later but why do we continue to see this kind of stupid association of Social Security finances with the rest of Federal government finances?