Tag: 2012 Federal Budget

Why We Must Do What Reagan Did

Reports are that the budget talks are falling apart. The Democrats have agreed to several trillion in budget cuts. But the GOP is refusing to budge even a little bit on taxation.

If I read the reports correctly, we would get something like five dollars in spending cuts for every dollar in tax increases. This is far better deal than we got under Reagan, Bush 41 or Clinton. The GOP should hold out as long as they can. But in the end, the federal government can not meet its existing commitments on 15% of the GDP. And the economic effects of large deficits or a default dwarf those of a tax increase.

The refusal to contemplate any tax increases illustrates the difference between talking and governing. We have a democratic Senate and White House. We can not wait until 2013 to solve this problem, even assuming the GOP would win both houses and that they would exercise the spending discipline they failed to exercise from 2000-2006. Holding our breath until we turn blue is not an option. Shutting down the government or defaulting is not going to generate an angry mob marching on Washington (something like 60% favor a combination of spending cuts and tax increases). The GOP simply has to cut a deal: preferably one that broadens the tax base rather than raises marginal rates. They can then use late 2011 and 2012 to push for a gigantic overhaul of the tax system (as Reagan did). If they want to cut taxes, make it an issue in the 2012 election.

Yes, that’s a compromise. But that’s how government works. We’re not going to get everything we want. We’re winning, getting unprecedented budget concessions that will shrink the size of government. Now is not the time to piss that away.